The Reserve Bank of India (RBI) has taken noteworthy action in addressing regulatory violations by IIFL Finance Ltd and JM Financial Products Ltd by initiating the process for the appointment of auditors to conduct a special audit of these non-banking finance companies.
The RBI has issued two distinct tenders for the appointment of auditors to carry out special audits of IIFL Finance and JM Financial Products. Audit firms that are empanelled by the Securities and Exchange Board of India (SEBI) for forensic audit are eligible to participate in the tendering process. The deadline for the submission of bids is April 8, 2024, as stated in the tender document published by the Reserve Bank of India. The selected audit firms will be awarded the work on April 12, 2024, in accordance with the bid documents.
Earlier this month, the RBI imposed restrictions on IIFL Finance and JM Financial Products due to non-compliance with regulatory guidelines. IIFL Finance was prohibited from sanctioning or disbursing gold loans after the RBI identified material supervisory concerns in its gold loan portfolio. The central bank conducted an inspection of IIFL Finance and observed serious deviations in the assaying and certifying of purity and net weight of gold at the time of loan sanction and auction upon default. The RBI stated that these practices not only constituted regulatory violations but also significantly and adversely impacted the interests of the company’s customers.
Similarly, the RBI imposed restrictions on JM Financial Products after finding that the company engaged in various manipulations, including facilitating a group of its customers to bid for various IPOs using loaned funds. As a result, the RBI barred JM Financial Products from providing any kind of financing against shares and debentures, including sanction and disbursal of loans against the initial public offering of shares and subscription to debentures.
The actions taken by the RBI were necessary due to the serious deficiencies observed in the loans sanctioned by JM Financial Products for IPO financing and NCD subscriptions. These measures underscore the RBI’s commitment to upholding regulatory standards and safeguarding the interests of stakeholders in the financial sector.
In light of these developments, it is important for businesses and investors to stay informed about ongoing developments in the financial sector, including updates on regulatory compliance and market conditions. By remaining updated on business news, gold rates, and other relevant information, stakeholders can make well-informed decisions and navigate the dynamic landscape of the financial industry.
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