The Aryavarth Express
Agency(New Delhi): The Reserve Bank of India (RBI) has taken a significant step towards ensuring the integrity of non-banking financial companies (NBFCs) by initiating special audits of IIFL Finance Ltd and JM Financial Products Ltd. This decision follows the detection of regulatory breaches by these firms. To facilitate this process, the RBI has released two separate tenders, inviting audit firms empanelled by the Securities and Exchange Board of India (Sebi) for forensic audits to partake in this crucial examination. The deadline for submitting bids is set for April 8, with the announcement of selected firms scheduled for April 12, 2024.
This move comes after the RBI recently imposed restrictions on both entities due to non-compliance with regulatory guidelines. Specifically, IIFL Finance faced prohibitions against sanctioning or disbursing gold loans after the RBI identified severe supervisory concerns within its gold loan portfolio. An inspection revealed significant deviations in the assaying and certifying of gold’s purity and net weight, both at the time of loan sanction and auction following defaults. These discrepancies, which deviate from regulatory standards, also adversely affect customer interests.
Similarly, JM Financial Products Ltd encountered restrictions after the RBI discovered that the firm engaged in manipulative practices, including assisting a specific customer group to bid for various initial public offerings (IPOs) through borrowed funds. As a result, this systemically important NBFC has been barred from offering any financing against shares and debentures, including loans for IPO share purchases and debenture subscriptions. The RBI highlighted severe deficiencies in the company’s loan sanctions for IPO financing and non-convertible debenture (NCD) subscriptions as the basis for these restrictions.
The initiation of special audits for IIFL Finance Ltd and JM Financial Products Ltd underscores the RBI’s commitment to maintaining the financial system’s integrity and protecting consumer interests. By scrutinizing these firms’ operations, the RBI aims to identify and rectify regulatory breaches, ensuring that NBFCs adhere to established financial norms and practices.
