Shares of IIFL Finance Ltd are in focus today after the Reserve Bank of India (RBI) asked the NBFC to stop sanctioning or disbursing gold loans with immediate effect citing certain material supervisory concerns in the company's gold loan portfolio. The disclosure to bourses was made after market hours on Monday.
Shares of IIFL Finance closed 3.35 per cent lower at Rs 595 against the previous close of Rs 618.85 on BSE. The stock opened higher at Rs 621.55.
In a year, the stock has gained 34 per cent. Total 0.22 lakh shares changed hands amounting to a turnover of Rs 1.34 crore on BSE on Monday. The market cap of the firm slipped to Rs 22,816 crore.
In terms of technicals, the relative strength index (RSI) of IIFL Finance stands at 47.7, signaling it's trading neither in the overbought nor in the oversold zone. IIFL Finance shares are trading higher than the 20 day, 200 day but lower than the 5 day, 10 day, 50 day and 100 day moving averages.
IIFL Finance stock has a one-year beta of 0.5, indicating low volatility during the period.
IIFL, however, can continue to service its existing gold loan portfolio through the usual collection and recovery processes, the central bank said.
"The Reserve Bank of India has today, in exercise of its powers under Section 45L(1)(b) of the Reserve Bank of India Act, 1934, directed IIFL Finance Ltd. to cease and desist, with immediate effect, from sanctioning or disbursing gold loans or assigning/ securitising/ selling any of its gold loans," the RBI said in a press release.
In response to the RBI action, IIFL Finance clarified, "We reaffirm our commitment to rectify observations of the RBI in the gold loan portfolio to comply with RBI findings at the earliest and will continue with our endeavour to provide gold loan services in the overall interest of customers."
RBI carried out an inspection of the company with reference to its financial position as of March 31, 2023 after which certain material supervisory concerns were observed in the gold loan portfolio of the company.
These 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 (LTV), significant disbursal and collection of loan amount in cash far in excess of the statutory limit among others, the RBI said.
IIFL Finance is among the leading retail-focused diversified NBFCs in India, engaged in the business of loans and mortgages along with its subsidiaries - IIFL Home Finance and IIFL Samasta Finance.