IIFL Finance's Nirmal Jain Says No Ethical Issues At Play After RBI Action

There are no ethical issues at play and it is just an operational issue, according to Nirmal Jain, managing director of IIFL Finance Ltd., after the RBI barred the company from disbursing fresh gold loans.

There are no governance issues, he said in an address to analysts on Tuesday.

Jain said that gold testing is a manual and subjective process, and is done at branches. Audit team tends to be more conservative and this may differ from how branches look at the value of gold. "We have taken corrective action to ensure that differences in assessment of gold value between branches (and) audit teams is minimal."

Emphasising on the corrective actions, Jain explained that the company is putting stronger systems in place in order to ensure that deviations are minimal.

Referring to the auction of gold, he said that last year, IIFL Finance conducted e-auctions for gold as they were more transparent. However, the auction-notification charge has not been factored by the RBI and that point may need to be clarified. "While (the) directive from (the) RBI appears a little harsh, (we) would like to express utmost gratitude to the regulator," he said.

The company has also approached the RBI for an urgent meeting, according to Jain. "We have approached RBI for a special audit to resolve issues.... Hopefully, the special audit will happen sooner than later to check compliance."

All interactions with the RBI have happened over the last 45 days, according to the top executive.

On Monday, the RBI, in its official release asserted that it engaged with senior management and statutory auditors of IIF Finance for several months. However, since no meaningful action was noticed, regulatory action was taken.