RBI’s special audit to inspect JMFPL and IIFL Finance’s regulatory infractions

The RBI had said that the business limitations would be reevaluated when a special audit was finished and the shortcomings had been satisfactorily corrected.

Money

By Sneha Sengupta On Mar 23, 2024

Commencing on April 12, 2024, the Reserve Bank of India (RBI) will conduct a special audit of IIFL Finance Ltd and JM Financial Products Ltd (JMFPL) in order to delve deeper into their regulatory violations.

IIFL Finance is prohibited from providing gold loans, while JMFPL is prohibited from funding debentures or shares. The RBI had said that the business limitations would be reevaluated when a special audit was finished and the shortcomings had been satisfactorily corrected.

In order to safeguard the interests of its clients, RBI prohibited IIFL Finance on March 4, 2024, from authorizing and disbursing any new gold loans due to “material supervisory concerns.”

The tendering process is open to audit firms that Sebi has accredited for forensic audits.

As of December 31, 2023, gold loans made up 79% of IIFL Finance’s standalone AUM and 32% of the IIFL Finance Group’s total consolidated assets under management (AUM), or Rs 24,692 crore.

With immediate effect, the central bank restricted JM Financial Products from offering any kind of financing secured by shares and debentures, including the approval and disbursement of loans against initial public offerings, on March 5, 2024.

Regarding loans approved by the company for financing its initial public offering (IPO) and subscriptions for non-converting bonds (NCDs), the RBI found several very major inadequacies.

JM Financial Products’ net assets were valued at Rs 1,942.86 crore, or 17.32% of the group’s consolidated net assets, as per the company’s annual report for FY23.