RBI Restricts ‘JM Financial Products Limited’ from Engaging in Any Form of Financing Against Shares and Debentures

Press Release: 2023-2024/2006; Dated: 05.03.2024

RBI has barred ‘JM Financial Products Limited’ from doing any form of financing against shares and debentures after it found ‘serious deficiencies’ that are detrimental to the interest of its customers during a review of its books. This includes sanctioning and disbursing loans against the Initial Public Offering (IPO) of shares and subscription to debentures.

With immediate effect, ‘JM Financial Products Limited’ has been asked to ‘cease and desist’ from doing any form of financing against shares and debentures. However, the RBI has allowed the company to continue to service its existing loan accounts through the usual collection and recovery process.

During the limited review, the RBI observed that the company repeatedly helped a group of its customers to bid for various IPO and NCD offerings by using loaned funds. The credit underwriting was found to be perfunctory, and financing was done against meagre margins.

The application for subscription, the demat accounts and the bank accounts were all operated by the company using a Power of Attorney (POA) and a Master Agreement obtained from these customers without their involvement in the subsequent operations. Consequently, the company was able to effectively act as both lender and borrower.

RBI found these actions to be in violation of its regulatory guidelines. Also, it found serious concerns on governance issues in the company. These restrictions will be reviewed upon the completion of a special audit to be instituted by the RBI and after rectification of the deficiencies to the satisfaction of RBI.

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