After months of restrictions, IIFL Finance received some relief on September 19, 2023, when the Reserve Bank of India (RBI) lifted the ban that had prevented the company from giving new gold loans since March 2023. Nirmal Jain, co-founder and managing director of IIFL Finance, shared his thoughts on the situation in an interview, shedding light on the valuable lessons learned and the company’s future plans.
Risk Can Come from Unexpected Places, Compliance is Non-Negotiable
Nirmal Jain emphasized that one of the biggest takeaways from the six-month ordeal is the unpredictable nature of risks in business. He pointed out that companies must always be prepared to handle compliance risks that can arise from regulatory authorities like the RBI. Jain explained that the incident has underscored the importance of strictly following RBI guidelines to safeguard the company’s operations. He shared that IIFL Finance is now focusing on strengthening its compliance and risk management teams to ensure that growth continues without any regulatory roadblocks.
“We are putting more resources into compliance and risk management. It’s a priority for us now, and we aim to achieve growth while staying fully compliant with all rules,” Jain stated.
Employees Are Key, Desperation Should Be Avoided
Jain also highlighted the importance of maintaining a supportive work environment, even in tough times. During the RBI ban, the company made a conscious decision not to cut salaries or reduce staff. Despite the financial challenges posed by the restrictions, Jain stressed that treating employees well during such phases pays off in the long run. “We never reduced employee salaries even though it seemed like the easiest option. Our philosophy is to support them, and today, we are benefiting from that decision as our employees remain loyal and motivated,” Jain said.
Public Sector Banks Provided Strong Support During Crisis
Jain acknowledged the crucial role that public sector banks played in helping the company navigate the crisis. According to him, banks such as government-owned ones acted swiftly and systematically when the RBI imposed the ban. Jain mentioned that the banks held discussions with the company to ensure transparency, and even appointed a monitoring agency with IIFL Finance’s consent. The agency’s role was to monitor data and ensure that the flow of money during the restriction was managed properly.
The public sector banks also appointed external auditors to carry out detailed audits of IIFL’s gold loan operations. “RBI also did its own auditing, and thankfully, they didn’t find any significant issues. This reinforced the trust and partnership we have with these banks,” Jain added.
IIFL Finance Strengthens Compliance and Risk Management
Reflecting on what might have gone wrong, Jain admitted that the company’s compliance team may have been weak, especially as the business expanded quickly. IIFL Finance is now making considerable efforts to strengthen its audit, risk management, and compliance teams. Jain shared that the company is focusing not just on regulatory matters, but also on HR, marketing, and other internal operations to ensure that every department is operating efficiently and effectively.
“Our business grew rapidly, which meant our compliance requirements also grew. Now, we are ensuring that every part of our team is equipped to handle the increasing demand, from audit and risk management to marketing and HR,” Jain explained.
By learning from this experience, IIFL Finance is setting itself up to avoid similar issues in the future. The company is committed to adhering to all regulations while continuing to pursue growth and expansion.
