India’s widening crackdown on financial sectors is only going to 'intensify' in the days to come, according to Pranav Bhavsar of India Independent Insight, who publishes on Smartkarma.
Bhavsar, in a Bloomberg report, says the action from RBI and SEBI that hit some shadow bank stocks “is here to stay and possibly intensify.”
Shadow banks are on radar. On Thursday, regulators barred JM Financial from leading debt sales after earlier prohibiting the group from lending against shares and bonds. The measures came after the banking regulator barred an affiliate of fintech giant Paytm from accepting fresh deposits, while the capital markets watchdog urged mutual fund sellers to safeguard investors against excessive froth in small-cap stocks.
IIFL Finance was asked to stop sanctioning or disbursing gold loans after the RBI found “material supervisory concerns” in its portfolio.
IIFL had said it is committed to comply with the RBI findings. More such moves may be in the cards as the RBI steps up vigilance on firms engaged in equity markets financing, the report added.
Financial services firms have been getting repeated missives from the RBI to improve their governance and risk assessment systems for months. Even though bad debts are at a more than a decade low, the regulator has clamped down on unsecured lending and asked banks to make more provisions for other loans. Officials are also warning about lapses in customer verification to guard against potential fraud and money laundering.
“We are unhappy about some of the malpractices that we see,” she said, referring to inflation of IPO application numbers. “We now have the data and we will act,” Sebi chief Madhabi Puri Buch said in January.
JM Financial’s shares tumbled as much as 20% on Wednesday — the limit imposed by the exchange — the biggest intraday slide in four years, dragging down other financial stocks. Shares in IIFL Finance Ltd., another shadow lender facing RBI scrutiny, plunged by the 20% limit in each of the last two sessions. Both stocks have since recovered some losses.