IIFL Finance to appoint external assayer to assess gold quality

Search for new compliance officer underway [View in browser]( [See all newsletters]( 06 March 2024 IIFL Finance to appoint external assayer to assess gold quality [On Monday, the Reserve Bank of India noted certain material supervisory concerns in the gold loan portfolio of IIFL Finance ] IIFL Finance gold business is expected to undergo some massive changes in the coming months. As a start, the company will replace its internal assayers with certified external personnels to assess the value and quality of the underlying asset before loans can be extended. The company also plans to revamp and beef up its compliance team and the search is on to bring in a new compliance officer. “Like most NBFCs, IIFL was also assessing the value of gold using internal resources because it reduced the turnaround time on loan disbursements and was cost effective. Now that practice must be discontinued and the lender is in the process of appointing external assayers like how it is done in most banks,” said a person familiar with the development. The person also added that the search for a new compliance officer with deep expertise in the financial services industry is underway and the appointment of should be made a few months. IIFL Finance did not respond to the email sent to seeking conformation on the above developments. Gold loans account for 32 per cent of IIFL Finance’s total loan book and stood at ₹24,692 crore in December FY24 quarter. On Monday, the Reserve Bank of India noted certain material supervisory concerns in the gold loan portfolio of IIFL Finance which included 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 the statutory limit; non-adherence to the standard auction process; and lack of transparency in charges being levied to customer accounts. Critical issues According to sources, IIFL may have overvalued the underlying asset (gold) at the time of extending the loan in its branches and this discrepancy has come to fore during the time of audit and/or auctioning the asset. “There are instances where 18-carat gold may have been recorded as 22-carat gold at the branch,” said a senior official aware of the matter. “Likewise, once sanctioned the loan amount should be withdrawn by the borrower through a bank account. It cannot be handed out in case. Only up to ₹20,000 can be availed as cash whereas this limit was far breached”. Stock takes a beating Following the RBI curbs, IIFL Finance stock was locked in the lower circuit (down 20 per cent) at ₹478.5 a share on Tuesday. In a call with investors, Nirmal Jain, MD, IIFL Finance said, “while the directory of RBI appears to be a bit hard, I take a moment to express our profound gratitude and admiration for the RBI. I want to make it unequivocally clear that there are no governance or ethical issues at play. These are operational and procedural issues which we will address.” You Might Also Like [RBI directs JM Financial Products to halt financing against shares and debentures]( [Money & Banking]( [RBI directs JM Financial Products to halt financing against shares and debentures]( [CLSA downgrades TCS, HCL to ‘sell’ on weak sector outlook]( [News]( [CLSA downgrades TCS, HCL to ‘sell’ on weak sector outlook]( [Conciliatory move: Google extends “temporary relief” to certain app developers post govt nudge]( [Info-tech]( [Conciliatory move: Google extends “temporary relief” to certain app developers post govt nudge]( [Ammunitions maker Munitions India’s export orders swell to ₹6,000 crore]( [Companies]( [Ammunitions maker Munitions India’s export orders swell to ₹6,000 crore]( Stay informed Subscribe to businessline to stay up-to-date with in-depth business news from India [arrow]( Copyright @ 2024, THG PUBLISHING PVT LTD. If you are facing any trouble in viewing this newsletter, please try [here]( Manage your newsletter subscription preferences [here]( If you do not wish to receive such emails go [here](