The rating agency expects the company’s credit profile to improve over the next two years, particularly its business and risk profiles, asset quality and funding diversity.
“The revision also reflects Fitch’s expectation of a gradual decline in legacy problem assets over the next two years along with stabilisation of asset quality risks as management pivots the portfolio towards secured lending categories. Nonetheless, we believe near-term credit costs will remain elevated as management remediates existing problem loans, and rapid loan expansion could stretch risk and control frameworks, and raise operational risks,” Fitch said while acknowledging that it will take time to assess the robustness of IIFL’s controls as the business scales following the lifting of the regulatory restrictions. Fitch was referring to the restrictions imposed by RBI last year.
In March 2024, RBI had prohibited the company from sanctioning, disbursing, or selling any of its gold loans citing certain supervisory concerns. The RBI had cited 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, breaches in loan-to-value ratio, among others. The ban was lifted in September 2024.
