IIFL Finance and JM Financial Under RBI’s Radar (Image Source: iStockphoto)
The Reserve Bank of India (RBI) has initiated a special audit process for IIFL Finance Ltd and JM Financial Products Ltd (JMFPL) to delve deeper into their regulatory breaches. Two separate tenders have been floated by the RBI for the appointment of auditors to conduct these special audits.
Audit firms empanelled by the Securities and Exchange Board of India (Sebi) for forensic audits are eligible to participate in the tendering process, with bids required to be submitted by April 8, according to the tender document released by the RBI. The selected firms will be awarded the task on April 12, 2024.
Earlier this month, the RBI imposed restrictions on both entities due to non-compliance with regulatory guidelines. IIFL Finance faced restrictions on sanctioning or disbursing gold loans after the RBI noted significant concerns in its gold loan portfolio, particularly deviations in assaying and certifying purity and net weight of gold during loan sanctioning and auctioning upon default.
Similarly, JM Financial Products Ltd faced restrictions for its involvement in various manipulations, including assisting its own customers in bidding for IPOs using loaned funds. As a result, the RBI prohibited the systemically important non-deposit-taking NBFC from providing any financing against shares and debentures, including loans against initial public offerings and subscription to debentures.
The RBI emphasised that these actions were necessary due to serious deficiencies observed in the companies’ practices, which not only violated regulations but also significantly impacted customer interests. Such deviations, especially in the case of IIFL Finance, raised concerns regarding the purity and weight assessment of gold, posing risks to loan quality and financial stability.
