India's central bank on Monday ordered non-bank entity IIFL Finance to stop sanctioning and disbursing gold loans, as it found "material supervisory concerns" in its gold loan portfolio that were not corrected.
These included "serious deviations" in assessing the gold taken as collateral and breaches in the maximum permitted loan- to-value ratio, the Reserve Bank of India (RBI) said in a release.
The RBI also found that IIFL Finance used cash collections more than what was permitted and said there was no transparency in the charges it levied.
The central bank had been engaging with senior management and auditors of the company on these deficiencies over the last few months.
However, no meaningful corrective action was "evidenced so far", necessitating the imposition of business restrictions with immediate effect, the RBI said.
The company can, however, continue to service its existing gold loan portfolio through usual collection and recovery processes, the regulator said.
IIFL Finance did not immediately respond to a Reuters' request seeking comments.
