This decline came after the Reserve Bank of India (RBI) prohibited the NBFC from granting or disbursing gold loans, or from assigning, securitizing, or selling any of its gold loans. However, the company is still allowed to manage its existing gold loan portfolio through regular collection and recovery procedures.

Following this announcement, shares of IIFL Finance surged by 10 percent, reaching Rs 353.50 on the BSE on Wednesday. This increase was accompanied by heavy trading volumes, with only buyers seen at the counter. The stock managed to bounce back by 13 percent from its lowest point in the past 52 weeks, which was Rs 313.25 reached during intra-day trading.

The average trading volumes on the counter more than doubled, with a combined 5.6 million equity shares, equivalent to 1.5 percent of IIFL Finance's total equity, being traded on the NSE and BSE. Additionally, there were pending buy orders for 240,000 shares on both exchanges, according to available data.

In response to the regulatory actions, the RBI has initiated a special audit of IIFL Finance Ltd and JM Financial Products Ltd (JMFPL) to further investigate their regulatory breaches. This audit is scheduled to begin on April 12, 2024. While IIFL Finance is prohibited from extending gold loans, JMFPL faces restrictions on financing shares or debentures.

The RBI has stated that these business restrictions will be reconsidered once the special audit is completed, and the identified deficiencies are rectified to satisfaction. This move aims to ensure compliance with regulatory standards and safeguard the interests of investors and stakeholders.