IIFL Finance’s stock plummeted by 20% for a second consecutive day following the RBI’s prohibition on new gold loans for the company. The shares hit a 52-week low at Rs 382.20 on the NSE, triggered by the RBI’s halt order. This directive was a result of an RBI inspection as of March 31, 2023, which uncovered several regulatory breaches in IIFL Finance’s operations, particularly in its gold loan segment.
The RBI’s scrutiny of IIFL Finance revealed significant issues in the company’s gold loan portfolio. These included major lapses in determining gold purity and weight during loan approvals, violating loan-to-value ratios, and excessively high cash transactions, exceeding legal limits. Despite ongoing discussions between the RBI, IIFL’s top management, and auditors, there has been a lack of substantial remedial actions from the company’s side.
However, the RBI’s order does not affect IIFL Finance’s existing gold loans. The company is permitted to continue with the regular collection and recovery procedures for its current gold loan portfolio. This allowance lets the company manage its existing loans while complying with the RBI’s restrictions on new gold loan disbursements.