No concerns about co-lending relationships with IIFL Finance after RBI action: MD of DCB Bank departing

No concerns about co-lending relationships with IIFL Finance after RBI action: MD of DCB Bank departing

The Reserve Bank of India (RBI) had requested on March 4 that IIFL Finance cease approving or paying out gold loans after discovering some "material supervisory concerns" in the company's portfolio of gold loans.

For the March quarter, the bank declared a net profit of Rs 156 crore.

The departing chief executive officer and managing director (CEO and MD) of private sector lender DCB Bank, Murali Natrajan, said that the bank had no concerns about its co-lending arrangement with IIFL Finance.

At a press conference after the results on April 24, Natarajan said, "With regard to our co-lending arrangement with IIFL Finance, our relationship and portfolio quality thus far, including payments, after March 4 has not shown any concern."

The bank stated on March 4 in a regulatory filing after the RBI's action against IIFL Finance: "The bank has co-lending relationships with NBFCs (non-banking financial companies) beginning May 2021." August 2021 marked the start of the bank and IIFL Finance Limited's co-lending partnership for gold loans. Our portfolio has performed well so far. Our due diligence procedure provides us with a fair level of comfort over the co-lending portfolio.

RBI action and a special audit of IIFL

On April 23, IIFL Finance began a special audit under the direction of the banking regulator. The business notified stock markets of this via a regulatory filing. According to a notification from IIFL Finance to exchanges, new gold loan disbursements will not resume until the audit is "satisfactorily completed."

The financial and investment services firm said it is offering the special audit team its complete cooperation. The step is a component of the RBI's supervisory action over concerns about certain loan distribution methods.

The Reserve Bank of India (RBI) had requested on March 4 that IIFL Finance cease approving or paying out gold loans after discovering some "material supervisory concerns" in the portfolio of loans the business had made. After the regulatory action the next day, shares had seen a severe decline. The RBI's assessment had shown that the charges being applied to consumer accounts were opaque and that the regular auction procedure was not being followed.

"These practices, apart from being regulatory violations, also significantly and adversely impact the interest of the customers," according to the RBI.

Following the RBI's decision to stop offering gold loans, IIFL Finance has been trying to raise money. On April 17, the firm authorized a Rs. 1,272 crore rights issue, which is expected to open at the end of this month. The organization offers salaried, self-employed, and MSME client segments gold loans across 2,721 towns and cities spread over 25 states and four Union Territories.

DCB Bank during the fourth quarter

The bank saw a 9.85% increase in net profit over the same time last year, totaling Rs 156 crore during the March quarter. In the fourth quarter of the fiscal year 2022–2023 the bank declared a profit of Rs 142 crore. In the fourth quarter of FY24, the bank's overall revenue increased to Rs 1,581 crore from Rs 1,302 crore the previous year.