The directive comes after the regulator observed certain material supervisory concerns in the company's gold loan portfolio, said an RBI notification.
The concerns include 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, nonadherence to the standard auction process, and lack of transparency in charges being levied to customer accounts."These practices, apart from regulatory violations, also significantly and adversely impact the interest of the customers," RBI said in the notification.
The company can no longer sanction, disburse, assign, securitise or sell any gold loan product. However, IIFL Finance can continue to service its existing gold loan portfolio through usual collection and recovery processes, the notification added.
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