RBI To Appoint Auditors To Investigate IIFL Finance And JM Financial For Regulatory Violations

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 central bank forbade IIFL Finance from sanctioning or disbursing gold loans after significant supervisory concerns were identified in its gold loan portfolio

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IIFL Finance Ltd and JM Financial Products Ltd (JMFPL) are set to undergo special audits to further investigate their regulatory violations, as the Reserve Bank has begun the process of appointing auditors. The Reserve Bank has released two separate tenders for the appointment of auditors to conduct special audits of these two non-banking finance companies.

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 bid submissions is April 8, according to the tender document published by the Reserve Bank of India, reported PTI.

RBI Impose Restrictions 

The selected firms are expected to be awarded the work on April 12, 2024, as per the bid documents. Earlier this month, the Reserve Bank imposed restrictions on these two entities due to non-compliance with regulatory guidelines.

The central bank forbade IIFL Finance from sanctioning or disbursing gold loans after significant supervisory concerns were identified in its gold loan portfolio. The RBI stated that it conducted an inspection of the company regarding IIFL's financial position as of March 31, 2023.

The RBI stated, "Certain material supervisory concerns were observed in the gold loan portfolio of the company, including serious deviations in assaying and certifying purity and net weight of the gold at the time of sanction of loans and at the time of auction upon default."

According to the central bank, in addition to being regulatory violations, these practices have a significant and negative impact on the interests of customers. Following this, the Reserve Bank imposed restrictions on JM Financial Products Ltd after finding that the company engaged in various manipulations, including assisting a group of its customers in bidding for various IPOs using loaned funds.

The central bank prohibited the systemically important non-deposit-taking NBFC from providing any financing against shares and debentures, including sanctioning and disbursing loans against initial public offering (IPO) of shares and subscription to debentures.

In a statement, the RBI mentioned that these actions were "necessitated due to certain serious deficiencies observed in respect of loans sanctioned by the company for IPO financing as well as NCD (non-convertible debentures) subscriptions".