The increasing crackdown on the financial sector in India will only "intensify" in the coming days, predicts Pranav Bhavsar of India Independent Insight, a writer for Smartkarma.
According to Bhavsar, the RBI and SEBI action that impacted some shadow bank stocks "is here to stay and possibly intensify," according to a Bloomberg report.
Shadow banks are being monitored. Regulators had earlier banned JM Financial from lending against bonds and shares, and on Thursday they prohibited the company from spearheading debt offerings. The actions followed the banking regulator's decision to prevent a Paytm subsidiary from taking on new deposits, and the capital markets regulator's recommendation to mutual fund vendors to protect investors from excessive froth in small-cap stocks.
The RBI discovered "material supervisory concerns" in IIFL Finance's portfolio, and as a result, the company was directed to cease authorizing or paying out gold loans.
IIFL had declared that it will abide by the RBI's conclusions.
The study further stated that as the RBI increases its scrutiny of companies involved in equity markets financing, more actions of this nature might be planned.
The RBI has been hammering away at financial services companies' governance and risk assessment procedures for months now. The regulator has cracked down on unsecured lending and ordered banks to increase their reserves for other loans, despite the fact that bad debts have dropped to levels not seen in almost a decade. In order to prevent possible fraud and money laundering, officials are also alerting the public about instances of inadequate consumer verification.
She made reference to the inflating of IPO application numbers when she added, "We are unhappy about some of the malpractices that we see." SEBI chief Madhabi Puri Buch declared in January that "we now have the data and we will act."
The largest intraday decline in four years occurred on Wednesday when JM banking's shares fell as much as 20%, the exchange-imposed maximum, pulling down other banking firms. In the last two days, shares of IIFL Finance Ltd., another shadow lender under investigation by the RBI, have fallen by the 20% limit. Since then, both stocks have gained some of their losses.
