The central bank had last week directed IIFL Finance to cease and desist from lending against gold. But it allowed the company to service its existing gold loan portfolio through the usual collection and recovery processes.
Fitch Ratings on Thursday put IIFL Finance on ‘Rating Watch Negative’ after the RBI asked the company to halt new gold-backed lending.
Impact of the curbs will depend on their duration and any spillover effects on the rest of IIFL Finance’s business, the agency said in a statement. Watch period, which lasts roughly up to six months, is used to analyse fixes and the firm’s performance while under it.
“As such, the company will continue to earn income on its outstanding gold-loan portfolio until the balance matures,” the ratings agency said. It further noted that the financial implication will be balanced against the company’s ability to maintain other lending activities, not been cited in the ruling.
“We believe this signifies gaps in the entity’s governance framework in ensuring sound practices and policies, and in the operational execution of its gold-loan strategy,” Fitch Ratings wrote.
The central bank had last week directed IIFL Finance to cease and desist from lending against gold. But it allowed the company to service its existing gold loan portfolio through the usual collection and recovery processes. The gold loan asset under management of the company has grown 35 per cent year-on-year to ₹24,692 crore and 4 per cent quarter-on-quarter.
Gold loan portfolio accounts for 32 per cent of the total assets under management in the December quarter.
