After RBI restriction, Fitch puts IIFL Finance on negative rating watch

Rating agency Fitch, on Thursday, placed India's IIFL Finance's 'B+' long-term issuer default rating and medium-term note programme rating on negative watch.

This comes after the country's central bank barred the non-banking finance company from offering gold loans earlier this month, citing "material supervisory concerns".

"The move reflects a downside risk to IIFL Finance's franchise, profitability and overall risk profile if regulatory restrictions on new gold-backed lending are prolonged," Fitch said in a note.

The impact of the restrictions will depend on their duration and any spill-over effects on the rest of IIFL Finance's business, Fitch said.

The company's gold loans under management stood at Rs 24,692 crore (around $3 billion) as of December 31, accounting for 32% of total loan assets.

IIFL Finance said on Wednesday it would raise funds of up to Rs 2,000 crore ($241.5 million) to shore up its capital, in addition to up to $200 million in liquidity support from top shareholder Fairfax India.

The company's shares have tumbled nearly 38% since the Reserve Bank of India placed the restrictions on March 4. The stock settled 3.5% lower on Thursday.