BENGALURU, Sept 20 (Reuters) - Shares in India's IIFL

Finance jumped about 13% on Friday, after the

country's central bank lifted restrictions on the non-banking

financial company's gold loan business, removing a key overhang

on its financials and stock.

Shares rose as much as 13.2% to 560.95 rupees, their highest

since late February. The stock was last up 9.2% at 541 rupees as

of 10:12 am IST. It had fallen about 14% as of last close, after

the RBI's ban came in March.

In March, the Reserve Bank of India had ordered IIFL Finance

to stop disbursing gold loans with immediate effect, citing

"material supervisory concerns" in its gold loan portfolio.

Following the curbs, the company started a special audit in

April as directed by the RBI.

Gold loans accounted for 21% of the company's total loan

assets, as of June 30, down from 30% as of March-end.

Some analysts had expected rival gold loan financiers such

as Manappuram Finance and Muthoot Finance to

benefit from lower competitive intensity after the regulatory

ban on IIFL Finance.

However, Muthoot Finance could now be at a higher risk of

giving up gains and underperforming on the lifting of

restrictions, Morgan Stanley ( MS ) said in a note on Thursday.

On Friday, Muthoot Finance was down 3% while Manappuram

Finance shed 1%.