Fairfax to invest $200 mn in IIFL Finance

While the RBI’s embargo has raised liquidity concerns among the company’s investors and lenders, Fairfax liquidity support will be on terms to be mutually agreed and subject to applicable laws, including regulatory approvals.

“We have been long-term investors in the IIFL group of companies and have full trust and confidence in the company’s strong management team led by Nirmal Jain and R Venkataraman. We are confident that Nirmal and Venkat will take corrective actions to meet and exceed RBI’s compliance standards,” said Prem Watsa, Chairman of Fairfax India.

On Monday, the RBI barred IIFL Finance from sanctioning or disbursing gold loans or assigning, securitising or selling any of its gold loans in the wake of several regulatory violations by the company.

In its December quarter investor presentation, the company said it’s among top two NBFCs in the country in the gold loans segment, having grown at a five-year CAGR of 39% over FY2019-23.

According to the company, its gold loan business amounted to Rs 24,692 crore, which is 32 per cent of the overall asset under management of Rs 77,444 crore as of December 2023.

IIFL Finance has over 2,721 dedicated gold loan branches spread across 25 states and Union territories, manned by 15,000 employees.

The RBI said certain material supervisory concerns were observed in the gold loan portfolio of the company, including serious deviations in assaying and certifying purity and net weight of the gold at the time of sanction of loans and at the time of auction upon default. The RBI also noticed breaches in Loan-to-Value ratio, significant disbursal and collection of loan amount in cash far in excess of the statutory limit, non-adherence to the standard auction process and lack of transparency in charges being levied to customer accounts.