Gold loan:-The NBFC says they fixed errors and asked the RBI to conduct a special audit.
Gold loan:-The RBI has told IIFL to limit their cash payouts to ₹20,000, down from the previous amount of up to ₹2 lakh.
The RBI recently checked IIFL Finance’s gold loan accounts and found that 67% of them had a deviation in the gold loan-to-value ratio. As a result, the banking regulator instructed IIFL Finance to stop giving out new gold loans on Monday.
Out of the 18.9 lakh gold loans given by IIFL in the financial year 2022-23, 82,000 accounts were put up for auction because the borrowers didn’t pay back the loans. During these auctions, the RBI found issues with 55,000 of these accounts.
IIFL said that many of its co-lending partners check each gold loan packet themselves to assess the purity and weight of the gold. In the future, IIFL will make sure that the assessment of the quality of gold jewelry is stricter.
To get the best prices for the gold jewelry being auctioned, IIFL used the e-auction platform Auction Tiger, like many other financial institutions and big banks. IIFL mentioned that they will now conduct all auctions at the taluka level as instructed by the RBI.
A lack of clear information.
Regarding the unclear fees charged to customer accounts, IIFL mentioned they will provide details about the ₹200 fee when sending notices for auction and an additional ₹1,300 fee during the auction of gold loans to make the process easier to understand.
The RBI told IIFL to limit cash payments to ₹20,000, instead of the previous ₹2 lakh. IIFL said they will follow this rule once the freeze on gold loan business is lifted.
Nirmal Jain, the Managing Director of IIFL Finance, stated that apart from the ₹20,000 limit on cash payments, which will be applied when they start giving out loans again, IIFL has addressed all other concerns from the RBI. They plan to ask the RBI for a special audit soon.
Abhijit Tibrewal, a Research Analyst at Motilal Oswal Research, mentioned that considering some recent incidents where the RBI stopped certain activities and products of financial institutions, it might take around six months for the regulator to conduct a special audit and address its concerns.