In a major decision, the Reserve Bank of India on Tuesday said that JM Financial has been barred from financing against shares, and debentures with ‘immediate effect.’ The central bank said that the action has been necessitated due to ‘serious deficiencies.’ The aforementioned deficiencies have reportedly been uncovered in the IPO financing of JM Financial.
The RBI clarified that JM Financial will continue to manage its existing loan accounts through standard collection and recovery procedures. As per the press release, the central bank observed certain repeated actions that led to this discontinuation of the company.
The official statement reads, “The company repeatedly helped a group of its customers to bid for various IPO and NCD offerings by using loaned funds.” Additionally, the company was also found as an ‘arranger of bank account opening as well as operator of the said bank accounts using the POA.’
According to a statement, business restrictions imposed on JM Financial Products will be reassessed after a special audit and once any identified issues are addressed to the satisfaction of the Reserve Bank of India (RBI). The statement also clarifies that these restrictions do not preclude other regulatory or supervisory actions that the RBI may take against the company.
JM Financial Products offers a diverse range of loan products, operating across five key verticals as outlined on its website: capital market financing, retail mortgage financing, bespoke financing, financial institution financing, and real estate financing. The company’s activities in these areas are subject to scrutiny by regulatory authorities, with the RBI taking necessary measures to ensure compliance with established norms.
This announcement underscores the regulatory oversight governing financial institutions and highlights the importance of adherence to regulatory requirements to maintain the integrity and stability of the financial sector.