Mumbai : The Reserve Bank of India (RBI) has restricted IIFL Finance from issuing new gold loans. This action has been taken due to serious lapses in IIFL's gold loan process.
The RBI has taken the action due to discrepancies between the value of gold and the loan amount, disbursement of cash in excess of regulatory limits set by the RBI, irregularities in the gold auction process and lack of transparency regarding charges levied on customer accounts. These errors not only violate procedures and rules but also adversely affect the interests of consumers. The RBI has been looking into the management and audit of IIFL for the past few months. On the basis of that information an attempt has been made to address the deficiencies found in the gold loan portfolio. But as these lapses are serious, the RBI has ordered an audit of the company's financial position and an immediate ban on granting new gold loans to IIFL.
The implications of this action are likely to be significant for IIFL and its customers. IIFL will incur financial losses due to the suspension of new gold loans and will also have to incur expenses related to rectifying the issues identified in the special audit. Existing IIFL Gold Loan customers may experience an increase in the interest rate or EMI (Equal Monthly Installment) on their loan.
