Non-bank lender IIFL Finance may face a rating downgrade. People familiar with the matter said that the company’s rating may be reduced due to the delay in removing RBI restrictions on the company’s gold loan business. Till March 2026, Crisil has maintained AA rating, which can be downgraded to AA-.
People familiar with the matter said that the rating was reviewed a few days ago. A downgrade in the rating can have a bad impact on non-banking companies. This is because the cost of debt is linked to such ratings.
On March 4, the banking regulator had banned IIFL Finance from lending against gold with immediate effect. It had found compliance related issues.
The issues found by RBI included serious lapses in certifying the purity and net weight of gold, violations in loan to value ratio, large disbursement of loan amounts and collections which were in excess of the statutory limits.
The company had given the compliance report
People familiar with the matter said IIFL Finance has addressed the issues pointed out by the RBI in its supervisory review and submitted a compliance report last month. However, it is yet to receive a response from the regulator.
IIFL Finance’s gold loan portfolio declined to Rs 12,162 crore as of August 5 from over Rs 26,000 crore as of March 31. Due to the high run-off factor and lack of new business, the gold loan segment may completely disappear from the company’s overall business.
IIFL Finance’s assets under management (AUM) stood at Rs 69,610 crore as on June 30. Earlier, it was Rs 78,960 crore on March 31. The lack of gold loans may also impact IIFL Finance’s yield on advances and the overall quality of the loan book.
At the end of the first quarter, IIFL Finance had a 19.6% yield on gold loan advances. The company’s cumulative yield on advances was 16.9%. Apart from this, the company will also have to lay off employees working in the gold loan business. Currently, the company has four or five employees associated with gold loans in its 2,775 branches.
