IIFL Finance woes continue: Amid the Reserve Bank of India's (RBI) recent ban on gold lending, finance company IIFL Finance finds itself navigating uncertain waters. Following a conference call on March 5, the company shed light on the challenges posed by the regulatory intervention, its impact on profitability, and the road ahead.

The ban, announced through an RBI press release, has thrown IIFL's gold loan business into disarray, prompting a reassessment of growth prospects and financial projections, analysts at Motilal Oswal noted. 

IIFL's response stresses upon the gravity of the situation, acknowledging the difficulty in predicting the ban's duration and subsequent review process.

The regulatory scrutiny stems from observed deviations in gold appraisal practices, including discrepancies in purity certification and net weight assessment during loan sanctioning and default auctions. 

The manual and subjective nature of jewellery appraisal, a widespread industry practice, has exposed vulnerabilities in IIFL's operations. 

Notably, the RBI's inspection sampled a fraction of auctioned gold loan accounts, revealing notable deviations in appraisal processes.

Considering these obstacles, IIFL faces the arduous task of restoring regulatory compliance, safeguarding customer trust, and mitigating reputational risks, Mumbai-based brokerage said in a note.

Immediate concerns include the potential erosion of the gold loan portfolio and employee attrition should the ban persist. Additionally, efforts to rebuild brand credibility may necessitate renewed investments.

Motilal Oswal continues to maintain a ‘buy’ recommendation for IIFL Finance, with target price of Rs 560 per share.

As stakeholders brace for uncertain times, the duration of the ban and its financial ramifications remain fluid. Market observers anticipate heightened volatility in IIFL's stock, stressing upon the need for vigilant monitoring amid evolving regulatory dynamics.

Notably, IIFL Finance shares hit lower circuit for second consecutive day on Wednesday, following RBI ban. As of 11:50 am, shares of the company were locked in the 20 per cent lower circuit at Rs 382.80 per share.