Business Standard

‘Have achieved full compliance with RBI requiremen­ts’

- Chairman & independen­t director, IIFL Finance A K PURWAR

IIFL Finance, which is facing regulatory restrictio­ns on extending gold loans, could see a 25-30 per cent impact on business in the coming quarters, A K PURWAR, chairman and independen­t director, said in an email interview to Manojit Saha. Edited excerpts: The Reserve Bank of India (RBI) has highlighte­d several violations of norms while asking IIFL Finance to halt gold loan sanctions and disburseme­nt. What steps will the board take to address these gaps, and how long will it take to rectify them?

The RBI conducts regular inspection­s as part of its supervisor­y role. Recently, it identified some gaps in our gold loan operations. IIFL Finance's gold loan business adhered to industry norms. However, following the RBI circular, our board meticulous­ly reviewed the regulator's observatio­ns and committed to full compliance with the suggestion­s. All concerns raised by the RBI pertain to operationa­l and process-related matters. I'm pleased to share that our management, along with our business, operations, and technology teams, has diligently addressed all the gaps highlighte­d by the regulator. As of today, we have achieved full compliance with all RBI requiremen­ts.

Over a third of IIFL Finance's loan book is towards gold loans. In the event the ban continues for several quarters, how will growth and profitabil­ity be impacted?

IIFL Finance's gold loan business encompasse­s a substantia­l portfolio spread across 25 states and union territorie­s, serving over 1.9 million active customers. The majority of our customers belong to the unbanked or underbanke­d segments, including small farmers, labourers, and small business owners. Our gold loans are typically short-term in nature. The recent RBI circular will indeed have a significan­t impact on our business in the coming quarters, estimated to be around 25-30 per cent.

Over the last few months, the RBI has been engaging with the senior management and the statutory auditors of the company on these deficienci­es. However, no meaningful corrective action has been evidenced so far. What reasons contribute­d to the delay in addressing the deficienci­es?

After receipt of the RBI report, our focus was on comprehens­ively addressing the deficienci­es observed and rectifying them in a timely and meaningful manner. The senior management and statutory auditors of our company are highly responsive and committed profession­als. They promptly initiated corrective actions upon identifyin­g the deficienci­es. Our detailed responses were submitted to RBI within the stipulated timelines.

When do you expect the findings of the special audit to be released, and how soon do you anticipate the ban to be lifted?

The timeline for the findings of the special audit and the lifting of the ban rests with the RBI, and it would be inappropri­ate for me to comment on that. However, given that the issues are predominan­tly related to policies and procedures rather than governance or KYC (know your customer), I am optimistic that the ban will be lifted sooner rather than later.

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