RBI crackdown: IIFL's Nirmal Jain calls action harsh, says no governance concerns

Following the RBI's ban on IIFL Finance from disbursing gold loans and raised supervisory concerns, the founder of IIFL Group, Nirmal Jain on Tuesday clarified that the RBI's action was attributed to "operational issues," rather than governance or ethical concerns.

"While the directive from RBI appears a little harsh, would like to express utmost gratitude to the regulator," Jain told TV channels a day after the RBI debarred the NBFC from sanctioning and disbursing fresh gold loans following “material supervisory concerns”.

Jain further added that the directive from RBI was a little harsh. HOwever, IIFL would address concerns raised by the regulator.

Also read/watch - IIFL Finance shares dive 20% following RBI ban on gold loan disbursement

The RBI on Monday directed IIFL Finance Ltd to cease and desist, with immediate effect, from sanctioning or disbursing gold loans or assigning/ securitising/ selling any gold loans.

In a statement on Monday, the RBI said it has 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 company can, however, continue to service its existing gold loan portfolio through the usual collection and recovery processes, it added.

The supervisory restrictions will be reviewed upon completion of a special audit to be instituted by the RBI and after rectification by the company of the special audit findings and the findings of RBI Inspection to the satisfaction of the central bank, it added.

Giving details, the central bank said an inspection of the company was carried out by it with reference to its financial position as of March 31, 2023.

Certain material supervisory concerns were observed in the gold loan portfolio of the company.