The Reserve Bank of India (RBI) has its sights set on financial firms breaching norms one after another. Initially banning the operations of Paytm's banking unit Paytm Payments Bank, then cracking down on gold loan supplier IIFL, and now imposing restrictions on IPO loan provider JM Financial. Post RBI's action, these companies' shares have scattered similarly to Paytm's.
Company under RBI's scrutiny
Firstly, discussing JM Financial, which the Central Bank has now reprimanded by imposing immediate restrictions this Tuesday. The RBI has taken measures against this financial firm for matters concerning IPO loan assistance to customers. Subsequent to such issues emerging, the Central Bank barred the non-banking finance company from offering any financial aid in exchange for shares and debentures, which includes loan approvals and distribution aligned with IPOs.
Company's share dips up to 20%
Following the RBI's action, JM Financial's shares witnessed a similar downfall, just like Paytm's parent One97 Share and IIFL Share. JM Financial's market share plunged by up to 20%, hitting ₹76.40 during early trading. However, as the market rallied later in the day, the stock's decline moderated. Yet, at market close, JM Financial's shares had fallen 10.42%, ending at ₹85.50.
Action on IIFL the day earlier
On Monday, RBI also took action against IIFL Finance due to supervisory concerns, implementing a gold loan ban. Following inspection, the Central Bank unambiguously instructed that they immediately cease issuing gold loans to customers. IIFL's loan portfolio stands at ₹77,444 crores, 32% (₹24,692 crores) of which pertains solely to gold loans. Post the Gold Loan Ban order, IIFL shares hit a 20% lower circuit in Tuesday's market opening, dropping to ₹477.75 a level. Additionally, Wednesday saw a similar 20% circuit breaker impacting the stock, bringing the share price down to ₹382.20.
Prior Paytm Bank intervention
Prior to these companies, on January 31, RBI acted against Paytm Payments Bank citing non-compliance and supervisory worries. It ordered regulatory proceedings, asking the bank to halt customer account deposits, wallet transactions, FASTags, NCMC cards, and prepaid top-ups until 15 March 2024, an extension from the initially set date of February 29. In the interim, Paytm shares suffered a significant fall.
