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The Reserve Bank of India (RBI) on Tuesday directed JM Financial Products Limited (the company) to stop from any form of financing against shares and debentures, including sanction and disbursal of loans against Initial Public Offering (IPO) of shares as well as against subscription to debentures.
The company shall, however, continue to service its existing loan accounts through the usual collection and recovery process. The central bank order has come into force with immediate effect. According to RBI, this action was necessitated due to certain serious deficiencies observed in respect of loans sanctioned by the company for IPO financing as well as NCD subscriptions. The RBI carried out a limited review of the books of the company based on the information shared by the Securities and Exchange Board of India (SEBI). During the limited review, RBI said it was observed, that the company repeatedly helped a group of its customers to bid for various IPO and NCD offerings by using loaned funds. "Apart from being in violation of regulatory guidelines, there are serious concerns on governance issues in the company, which in our assessment are detrimental to the interest of the customers. Regulatory violations and deficiencies, if any, on the part of the bank(s) in this regard is being examined separately," RBI said in a release. The business restrictions now being imposed, 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. (ANI)
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