The Reserve Bank of India (RBI) recently imposed strictures on IIFL Finance, prompting caution among its co-lending partners. Lenders are awaiting clarity as supervisory concerns over the NBFC’s gold loan portfolio emerge.
Co-lending arrangements involve banks partnering to expand their borrower base. However, RBI’s March 4 directive halted IIFL Finance from disbursing gold loans due to material supervisory concerns.
Notable partners like State Bank of India (SBI), ICICI Bank, and others are reevaluating their relationships with IIFL Finance. As of the third quarter of FY 2023-24, the NBFC’s gold loan portfolio amounted to Rs 24,692 crore, comprising 32% of its total assets under management (AUM).
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RBI highlighted various issues, including lapses in gold purity certification, breaches in loan-to-value (LTV) ratio, and excessive cash transactions within IIFL Finance’s operations. In response, the NBFC has pledged to address these concerns promptly to comply with RBI’s directives.
DCB Bank, one of IIFL Finance’s partner banks, has assured satisfactory portfolio performance post-RBI action. However, ongoing scrutiny underscores the importance of robust due diligence processes in co-lending arrangements.
As the situation unfolds, it is essential for co-lending partners and stakeholders to monitor developments closely and take necessary steps to ensure compliance and mitigate risks.
