look news india
New Delhi: Recently the Reserve Bank banned Paytm Payments Bank for violating the rules. After this, there was a huge fall in the shares of Paytm and people started worrying about the future of the company.
Now the central bank has taken strict action against another company. It on Monday banned IIFL Finance from accepting or disbursing gold loans with immediate effect. The Reserve Bank has taken this decision after noticing some irregularities in the gold loan portfolio of the company.
IIFL Finance, however, can continue to operate its existing gold loan portfolio through normal collection and recovery processes, the central bank said in a statement.
The banking regulator said it had inspected IIFL till March last year to assess its financial health. It found some serious deficiencies in the company's gold loan portfolio. This includes violation of norms in checking purity and weight of gold at the time of auction after loan sanction and default.
The RBI said the way IIFL Finance was testing and weighing the purity of gold was not only in violation of norms but was also playing against the interests of the customers. This means that the loan-to-value ratio of IIFL Finance has been found to be distorted.
The Reserve Bank said it would conduct a special audit of IIFL finances. If the company's performance shows improvement and the Central Bank is satisfied then the restrictions will be reconsidered.
What is the status of IIFL Finance shares?
IIFL Finance closed at Rs 598 at Rs 24.55, down 3.94 per cent on the National Stock Exchange on Monday. In the last one year, it has given returns of about 32 percent to investors. Now it remains to be seen what effect the RBI action has on the company's shares.
What does IIFL finance?
IIFL Finance is the country's leading finance and investment services company, providing facilities like Gold Loan, Business Loan and Personal Loan. It was founded in 1995 by Nirmal Verma. Earlier it was known as IIFL Holdings Limited.