The Reserve Bank of India (RBI) will initiate a special audit from April 12, 2024 to further investigate regulatory violations of IIFL Finance Ltd and JM Financial Products Ltd (JMFPL).
IIFL Finance has been banned from providing gold loans, while JMFPL faces a ban from lending on stocks and bonds. While imposing restrictions on both entities, the RBI had said it would review the business restrictions after a special audit is completed and deficiencies are rectified to its satisfaction.
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The regulator has launched an e-tender seeking interest from audit firms to conduct special audits of these two non-banking financial companies. Audit firms that have received assistance from Sebi for forensic auditing can participate in the bidding process. According to an announcement on RBI's website, the selected companies will be given jobs on April 12, 2024.
On March 4, 2024, the RBI sanctioned and suspended Fresh Gold Loan execution against IIFL Finance with immediate effect in order to protect the interests of customers following “serious supervisory concerns”. As on December 31, 2023, gold loans accounted for 32 per cent (Rs 24,692 crore) of IIFL Finance Group's total consolidated assets under management (AUM) and 79 per cent of IIFL Finance's standalone AUM. IIFL Finance manages over Rs 2,721 crore of him. We have dedicated gold loan branches in 25 states and Utah and approximately 15,000 employees.
With respect to JM Financial Products, on March 5, 2024, the central bank suspended all forms of financing for stocks and corporate bonds with immediate effect, including sanctions and disbursements of financing for initial public offerings. RBI has identified certain material deficiencies related to loans sanctioned by the company for initial public offering (IPO) financing and non-convertible debenture (NCD) applications.
The RBI conducted a limited audit of the company's books based on information shared with the Securities and Exchange Board of India (SEBI). According to JM Financial's annual report for FY23, JM Financial Products' net assets were valued at Rs 1,942.86 million, accounting for 17.32 per cent of the group's consolidated net assets.
