The Reserve Bank of India (RBI) on Thursday lifted the restrictions placed on IIFL Finance’s gold loan business, allowing the non-banking financial company (NBFC) to resume its gold loan operations.

The decision, which is effective immediately, permits IIFL Finance to recommence sanctioning, disbursal, assignment, securitization, and sale of gold loans, provided it adheres to all relevant legal and regulatory frameworks. 

The restrictions, imposed by the RBI earlier this year, had halted IIFL Finance from sanctioning or disbursing new gold loans. These measures were enforced after the central bank discovered material supervisory concerns during its inception of the company’s gold loan portfolio.

The regulatory scrutiny had significantly impacted the company’s operations, leading to a substantial contraction in its gold book and financial losses. 

According to the latest data, IIFL Finance’s gold loan book shrunk sharply by 35 percent falling from Rs 9,634 crore by the end of June 2024. The contraction occurred during a period of intense regulatory oversight, directly affecting the company’s profitability and financial health. In the quarter ending June 30, 2024, IIFL Finance reported a net loss of Rs 23 crore, compared to a profit of Rs 151 crore in the corresponding period of the previous year. 

Despite the operational setback, the company’s revenue from operations remained flat on a year -on-year basis at Rs 1,012 crore in the April-June period. The stability in revenue was overshadowed by the sharp decline in profits, which was largely attributed to the inability to conduct gold loan-related transactions during the period. 

The lifting of restrictions by the RBI is expected to provide IIFL Finance with the necessary resources to recover from its downtown. Analysts predict that the company will now focus on rebuilding its gold loan portfolio and regaining customer confidence in the coming quarters.

However, market sentiment remains cautious with IIFL Finance’s shares closing 5.8 percent lower at Rs 498.40 on the Bombay Stock Exchange following the announcement. The company’s next steps particularly in its compliance with the RBI’s Regulatory guidelines will be closely monitored by investors and market analysts. 

This development marks a pivotal moment for IIFL Finance as it aims to restore its position in the gold loan segment, one of the most competitive spaces in the Indian Financial market.