IIFL Gold Loan Ban: After recently banning the services of Paytm Payments Bank, RBI has now taken action against another finance company. The central bank has stopped IIFL Finance from distributing new gold loans.
Recently, after issuing a ban order on the banking business of veteran fintech firm Paytm, Paytm Payments Bank, now the Reserve Bank of India has taken similar action against another company. RBI has bluntly told this finance company to immediately stop giving gold loans to its customers. The central bank has taken this strict action on IIFL Finance.
IIFL stopped from distributing gold loans:
Central bank RBI issued an order on Monday, stopping non-banking finance company IIFL Finance from issuing new gold loans. The Reserve Bank has given this decision after investigation due to some supervisory concerns in the gold loan portfolio of IIFL. This means that now this NBFC company will not be able to give any new gold loan to its customers.
Action under RBI Act 1934:
RBI issued a statement regarding this action and said that this action of ban on gold loan has been taken under Section 45 L (1) (B) of the Reserve Bank of India Act 1934. However, according to the central bank, the company can continue its gold business, but cannot distribute new gold loans. RBI had inspected the company regarding the financial health of IIFL till March 31, 2023 and during this period, irregularities were found in the loan to value ratio (LTV) of the company, which is going to affect the interests of the customers in some way or the other. The central bank has prepared to conduct a special audit of the functioning of IIFL.
Such action has been taken on Paytm Bank.
Before IIFL Finance, the Reserve Bank had taken action to ban Paytm Payments Bank, the banking unit of Paytm, on January 31. Under this, the Reserve Bank had ordered regulatory action against Paytm Payments Bank on non-compliance and supervisory concerns. It had asked the bank to stop deposits, transactions, prepaid and top-ups in customer accounts, wallets, FASTags, NCMC cards and had initially fixed February 29 as the date for implementing the ban, which was later extended to March 15, 2024. Was extended till.
IIFL’s gold loan portfolio is large.
IIFL’s loan business is worth Rs 77,444 crore, of which 32 percent is only gold loan. If seen from this perspective, it is among the top NBFCs in the country in gold loan business. Its gold loan portfolio is worth Rs 24,692 crore. Giving a clarification regarding the RBI action, IIFL Finance MD Nirmal Jain on Tuesday said that the RBI action on the company’s gold loan business is due to operational issues, and not due to governance or ethical problems.
IIFL shares collapsed like Paytm.
The same effect of RBI’s action was seen on IIFL Finance Share as was seen on the stocks of Paytm’s parent company One97 Communication after the ban order on 1st February. The very next day of issuing the RBI order, Paytm’s shares fell by 20 percent. Now IIFL Shares also seem to have collapsed on Tuesday. As soon as the stock market opened, the company’s shares hit lower circuit and it slipped by 19.99 percent to the level of Rs 477.75.
