RBI Tightens Grip on NBFCs: FIDC Issues Advisory Amid Regulatory Crackdown

In a recent development, the Reserve Bank of India (RBI) has intensified its scrutiny over Non-Banking Financial Companies (NBFCs), issuing strict directives to prominent entities like IIFL Finance and JM Financial. Following these actions, the representative body of NBFCs, FIDC, has stepped in by releasing a crucial advisory for its members.

RBI’s measures include halting IIFL’s gold loan operations immediately, prohibiting the company from sanctioning or disbursing gold loans. Similar restrictions were imposed on JM Financial, preventing them from providing any financing against shares and debentures, including IPO shares and non-convertible debentures subscriptions.

In response to these developments, FIDC emphasized the significance of adherence to regulatory compliance and governance standards within the NBFC sector. It stressed that business operations must align with legal frameworks to ensure growth and sustainability.

FIDC’s advisory underscored the necessity for NBFCs to comply with all applicable laws and regulations, with a particular emphasis on Know Your Customer (KYC) and Anti-Money Laundering (AML) norms. The circular highlighted the potential risks posed by any laxity in internal processes to India’s internal security and economic well-being.

Furthermore, FIDC instructed its members to prioritize and promptly address any concerns or queries raised by regulators during supervision, both on-site and off-site.

The regulatory crackdown underscores the RBI’s commitment to maintaining the integrity and stability of the financial sector. NBFCs are urged to adopt stringent compliance measures and cooperate fully with regulatory authorities to ensure the smooth functioning of the industry while upholding national interests.