JP Morgan shuts one of its NBFCs in India, surrenders licence

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Mumbai: US-based financial services firm JPMorgan is shutting its non-banking financial company (NBFC) JP Morgan Advisors India and has surrendered its licence, documents showed.

Responding to a Right to Information (RTI) query, the Reserve Bank of India (RBI) said 45 companies have surrendered their NBFC licences so far in 2019. JPMorgan Advisors India was one of them, the list showed. To be sure, JPMorgan is not exiting its NBFC business since it also operates JPMorgan Securities India Pvt. Ltd.

“We are not exiting our NBFC business. We continue to operate an NBFC in India known as JPMorgan Securities India Pvt. Ltd,” a JPMorgan spokesperson said in an emailed response.

According to the spokesperson, the underlying business of JPMorgan Advisors ceased to exist a few years ago. “We surrendered the licence as we are not conducting any business in this company and will move for closure,” the spokesperson added.

Incorporated on 27 June 1996, the company is a subsidiary of JPMorgan Special Situations (Mauritius) Ltd and part of the JPMorgan Chase Group. JPMorgan Chase & Co. is its ultimate holding company, showed documents from the registrar of companies (RoC).

In FY18, the company reported a net profit of ₹21.79 crore, down from ₹51.64 crore in FY17. At the end of FY18, JPMorgan Advisors India had assets of ₹600 crore.

In its FY18 annual report, the company’s board said its prospects include extending credit facilities to corporate clients in the form of commercial papers, bonds, debentures, loans and securitized instruments. It also envisaged investing in government securities, treasury bills and money market instruments as part of liquidity management.

Interestingly, the company in FY18 spent more on corporate social responsibility (CSR) at ₹97 lakh than on employee expenses at ₹74 lakh.

The central bank’s RTI response showed that 89 companies surrendered licences in 2016, 139 in 2017 and 164 in 2018. Apart from companies surrendering licences, the central bank also cancels NBFC licences when they fail to meet certain regulatory criteria.

The RBI cancelled licences of 1,701 NBFCs in the financial year ended 31 March for failing to meet minimum capital requirements. As many as 779 licences were cancelled in October and November, just after the crisis in the shadow banking sector unfolded with Infrastructure Leasing and Financial Services Ltd (IL&FS) defaulting on debt repayments.

The defaults led to a scarcity of liquidity for other non-banks, triggering a crisis in the sector. In comparison, the RBI had cancelled licences of 26 NBFCs in FY18.

There were 9,659 NBFCs registered with the RBI as of 31 March, of which 88 were deposit-accepting and 263 were so-called systemically important non-deposit accepting NBFCs.