RBI on IIFL Finance, JM Financial: Actions to ensure ethical business practice, analysts say

livemint.com:

IIFL Finance, JM Financial and even Paytm Payments Bank. The central bank on March 4 had imposed an embargo on IIFL Finance’s gold loan business and then on JM Financial Products’ loan against shares & IPO financing business the next day, citing persistent regulatory non-compliance and governance issues.

Earlier on January 31, RBI had barred Paytm Payments Bank from accepting fresh deposits and doing credit transactions after February 29 citing repeated violations of norms and non-compliance with multiple rules. This deadline was later extended to March 15.

Analysts had earlier flagged that the Paytm Paytment Bank saga would have ramifications for the overall sector. They said that the list of financial penalties, and even of business embargos, was likely to scale up and should thus keep regulated entities and fintech companies on edge.

Also Read: JM Financial share price crashes 19% after RBI bans lending against shares, debentures While RBI’s actions indicate that it has zero tolerance for persistent regulatory non-compliance or misgovernance, its unrelenting clean-up drive is expected to impact growth, but also foster an environment for ethical lending and business practice. “We believe these punitive actions will impact systemic growth for NBFCs in the near term, but will hopefully curb unethical business practices, avert systemic collapse as seen in the past, and enhance stakeholder confidence in the long run," said analysts at Emkay Global Financial Services.

Deepak Shenoy, CEO of Capitalmind, in an interview with a news channel, also said RBI’s crackdown will now hit the whole industry and not just JM Financial. The central bank had put an embargo on fresh sanctions, disbursements and securitization of gold loans