India's IIFL Finance facing liquidity crunch after gold loan business curbs: Report

"Banks are neither sanctioning caller lines (of credit) nor disbursing from already sanctioned limits," the authoritative astatine the company, who did not privation to beryllium named, said.

Banks person stopped lending to IIFL Finance's golden and different businesses, the authoritative said, adding that the interaction of the curbs connected the wide concern is apt to beryllium astir 5 cardinal rupees ($60 million).

IIFL Finance did not instantly respond to a Reuters' email seeking comment.

In aboriginal March, the Reserve Bank of India (RBI) ordered IIFL Finance to halt sanctioning, disbursing and selling golden loans, citing "material supervisory concerns" successful its golden indebtedness portfolio.

Soon aft the curbs, IIFL Finance canceled a projected $400 cardinal dollar enslaved fundraising plan.

Its apical shareholder Fairfax India agreed to supply up to $200 cardinal successful liquidity enactment to assuage liquidity concerns. The institution has since raised 5 cardinal rupees done bonds and is looking to rise 12.72 cardinal rupees done a rights contented of shares.

"Banks are presently successful a wait-and-watch mode, and are waiting for the regulatory particulate to settee earlier taking connected much exposure," an authoritative with a state-run slope said.

"While co-lending should automatically restart erstwhile the RBI prohibition is lifted, we are staying distant from word loans astatine present."

Banks lend funds jointly nether a co-lending statement to dispersed the recognition risk. As of Dec. 31, 57% of IIFL Finance's full borrowing was from banks.

The bankers refused to beryllium named arsenic they are not authorised to talk to the media.

IIFL Finance had unencumbered currency and liquid equilibrium of astir 40.35 cardinal rupees connected arsenic connected March 5, arsenic per standing bureau ICRA.

"The drawdown successful liquidity is faster-than-expected arsenic different businesses of the institution besides person to survive," the institution root said.

The 2nd banker said it wants to debar lending to an entity that is nether the regulator's lens.

"With the regulatory scrutiny connected banks increasing, we would similar to temporarily halt lending till we get clarity connected however they benignant retired compliance-related issues and program to restart the business," the banker said.

Unlock a satellite of Benefits! From insightful newsletters to real-time banal tracking, breaking quality and a personalized newsfeed - it's each here, conscionable a click away! Login Now!

Published: 07 May 2024, 03:54 PM IST