IIFL Finance files compliance report with RBI: Sources

Non-banking finance company (NBFC), IIFL Finance, has filed a compliance report with the Reserve Bank of India (RBI) on Friday after making some key systemic changes in its operating processes, said sources close to the development. 

The banking regulator on March 4 had barred the NBFC from offering gold loans due to norm violations.

The central bank had barred IIFL Finance from offering, securitising or assigning any gold loans due to “serious” deviations in assaying and certifying purity and net weight of the gold at the time of sanction of loans and at the time of auction upon default, breaches in loan-to-value ratio, significant disbursal and collection of loan amount in cash far in excess of regulatory mandate, non-adherence to the standard auction process, and lack of transparency in charges being levied to customer accounts.

According to sources, the NBFC has now completely restricted cash disbursements of more than Rs 20,000 in gold loans. 

Secondly, in February it conducted gold auctions at taluka level and for assessing purity of gold, the RBI had directed changes be made in contract or bill, which has been completed.

Further, IIFL Finance is also in the process of sending detailed responses to banks including State Bank of India (SBI), Canara Bank, Union Bank of India, among others, on the actions the NBFC has taken to comply with the RBI’s norm. 

Banks are re-assessing their gold loan co-lending partnership with IIFL Finance and SBI has written letter to the NBFC seeking details on RBI’s diktat and IIFL Finance’s action plan from hereon, a senior banker said.

IIFL Finance has 15 co-lending bank partners which includes all businesses – gold loan, home loan and micro finance loans, among others. It’s gold loan co-lending partnerships includes 7 banks –DBS Bank India, DCB Bank, Canara Bank, Union Bank, South Indian Bank, Indian Overseas Bank and Karur Vysya Bank, as per the latest investor presentation.