Fairfax Pledges Up to $200 Million to Support IIFL Finance Amidst RBI Curbs on Gold Loans

6 Mar 2024 , 11:48 AM

IIFL Finance Ltd announced on March 6 that shareholder Fairfax India has extended support by agreeing to provide up to $200 million in liquidity assistance to the company. This development comes in the wake of the Reserve Bank of India’s recent imposition of restrictions on gold loan disbursals by the non-banking financial company (NBFC).

In a filing with the stock exchange, IIFL Finance disclosed that Fairfax India Holdings Corp, a longstanding investor, has committed to extending liquidity support amid the regulatory embargo imposed by the RBI effective March 5, 2024. ‘The RBI’s directive has raised concerns regarding liquidity among the company’s investors and lenders. In response to these concerns, Fairfax India has agreed to inject up to $200 million in liquidity support under mutually agreed terms, subject to applicable laws and regulatory approvals,’ stated IIFL Finance.

The RBI’s action, issued on Monday, prohibits IIFL Finance Ltd from disbursing gold loans immediately, citing several supervisory concerns, including significant deviations in assaying and certifying the purity of gold.

Prem Watsa, Chairman of Fairfax India, expressed confidence in the management team of IIFL Finance, led by Nirmal Jain and R Venkataraman, stating, ‘We have been long-term investors in the IIFL group of companies and have full trust and confidence in the company’s strong management team.’ Jain, the Managing Director and Founder of IIFL Finance, acknowledged the timely support from Fairfax India and emphasized the commitment to comply with RBI’s directives while ensuring business growth based on compliance, risk management, and fair practices.

Addressing concerns over the impact on profitability, the management of IIFL Finance assured analysts during a conference call on March 5 that there would be no significant near-term impact due to the RBI’s regulatory action. The company reiterated its commitment to continuing the recovery process and assured that the observations made by the RBI were operational issues that would be earnestly addressed.