The Reserve Bank of India's special audit of IIFL Finance has concluded, the company informed exchanges on Tuesday. The audit findings will be submitted to the central bank for review. However, the entire process may take 4–6 weeks to resolve after submission, according to people with knowledge of the matter who spoke on condition of anonymity.
The special audit had commenced on April 23.
In March, the central bank ordered IIFL Finance to stop sanctioning, disbursing and selling gold loans, citing "material supervisory concerns" in its gold loan portfolio. This led to concerns about liquidity among its investors and lenders.
Gold loans accounted for nearly a third of the company's total loan assets at the end of 2023.
As of March 31, gold loans accounted for 32% of assets under management in IIFL Finance's total portfolio. In Q3 FY24, the gold loan portfolio increased 35% year-on-year to Rs 24,692 crore, from Rs 18,284 crore in Q3 FY23.
Sequentially, it rose 4% from the previous Rs 23,690 crore.
The RBI had also said that the restrictions would be reviewed after the completion of the special audit. The restrictions were based on an inspection conducted concerning its financial position as of March 31, 2023.
The RBI found the following lapses:
There were serious deviations in assaying and certifying the purity and net weight of gold at the time of sanctioning loans.
The same was also observed at the time of auction upon default.
Breaches in the loan-to-value ratio were also found.
The RBI also found non-adherence to the standard auction process and a lack of transparency in the charges being levied on customer accounts.
"These practices, apart from being regulatory violations, also significantly and adversely impact the interests of the customers," the RBI said.
On Friday, shares of IIFL Finance closed 14.2% higher at Rs 473 apiece, as compared with a 2.05% rise in the benchmark Nifty 50.
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