The intent of RBI to clean up a lot of shady and regulation-related grey activities by both the new age fintech and traditional financial companies is clearly visible in the last few weeks.
In 2024, it all started with Paytm due to regulatory lapses, and yesterday it was IIFL finance where the central bank has now asked them to stop issuing fresh gold loans while today RBI asked JM Financial to stop giving loans against shares and debentures, including sanction and disbursal of loans against IPO immediately.
The good thing with this front-foot aggressive attack by RBI is that there will be a temporary and medium term slowdown in such practices and the company will start becoming a bit more regulation-compliant and slow things down temporarily.
RBI and even SEBI are now warning against leverage, upcoming risks, euphoria very often. RBI has taken it to next level by taking strict action against companies now. The thought process that anything in excess in the short run can harm long term prospects is a good one to have especially if we look at it from regulatory lens.
Keep an eye on and beware of companies eyeing extravagant growth in the short run in the fintech space. and of course, PSU banks seem like current beneficiaries but when things get shaky elsewhere, it will impact the sentiment eventually in this space too.
Long term IMO these are excellent steps by the RBI.