Mumbai, March 6 : The Reserve Bank of India (RBI) on Monday directed IIFL Finance Ltd. to stop sanctioning or disbursing gold loans or assigning/securitising/selling any of its gold loans with immediate effect.

The company can, however, continue to service its existing gold loan portfolio through usual collection and recovery processes, the RBI said.

The RBI said its inspection of IIFL’s financial position has revealed material supervisory concerns in the gold loan portfolio of the company, including serious deviations in assaying and certifying purity and net weight of the gold at the time of sanction of loans, and at the time of auction upon default.

The inspection also showed breaches in the loan-to-value ratio; significant disbursal and collection of loan amount in cash far in excess of the statutory limit; non-adherence to the standard auction process; and lack of transparency in charges being levied to customer accounts by the IIFL.

These practices, apart from being regulatory violations, also significantly and adversely impact the interest of the customers, the RBI pointed out.