JM Financial slumped after the central bank barred the company from doing any kind of financing against shares and debentures. However, the company said in a statement that there are no “material deficiencies” in the loan sanctioning process. Further, the spokesperson said that the company is in no violation of any applicable regulation.
The RBI has sanctioned and disbursement of loans against IPO shares and subscriptions to debentures.
The main reason behind taking this step RBI stated was that the company was using loaned funds to help a particular group of its customers to bid for various IPO and NCD offerings.
JM Financial became the third company after Paytm Payments Bank and IIFL Finance on which the RBI cracked the whip.
“This action is necessitated due to certain serious deficiencies observed in respect of loans sanctioned by the company for IPO financing as well as NCD subscriptions,” read a press release by the RBI on March 05.
However, the company will be able to continue its existing loan accounts’ service.
The stock of JM Financial has risen 0.78% in the past five days and 12% in the last six months. However, it gave a 30% return to investors in the last year and has fallen 0.71% in the last five years.