“RBI Imposes Ban on JM Financial’s from lending against shares, debentures”
In a significant move, the Reserve Bank of India (RBI) has issued a directive to JM Financial Products Ltd, instructing the company to immediately halt all forms of financing against shares and debentures. This directive encompasses the sanction and disbursal of loans against initial public offerings (IPOs) as well.
In a significant move, the Reserve Bank of India (RBI) has issued a directive to JM Financial Products Ltd, instructing the company to immediately halt all forms of financing against shares and debentures. This directive encompasses the sanction and disbursal of loans against initial public offerings (IPOs) as well.
The directive, effective immediately, prohibits JM Financial Products from providing any form of financing against shares and debentures. However, the company is permitted to continue servicing its existing loan accounts through the usual collection and recovery processes.
The RBI’s decision comes as a response to the identification of serious deficiencies in loans sanctioned by JM Financial Products for IPO financing and subscription to non-convertible debentures (NCDs). The central bank conducted a limited review of the company’s books based on information shared by the Securities and Exchange Board of India (SEBI).
Explaining the rationale behind the action, the RBI stated that the imposed business restrictions are necessary due to the observed deficiencies in the financing processes. These restrictions will remain in place until a special audit, to be conducted by the RBI, is completed and the identified deficiencies are rectified to the satisfaction of the central bank.
The directive issued by the RBI underscores the regulatory scrutiny and emphasis on ensuring the integrity and soundness of financing activities in the securities market. It serves as a reminder of the regulatory obligations incumbent upon financial institutions to uphold robust risk management practices and compliance standards.
JM Financial Products Ltd, a prominent player in the financial services sector, will now need to navigate through this regulatory challenge while addressing the identified deficiencies to regain the confidence of regulatory authorities.
As the RBI’s special audit progresses and the company works towards rectification, market participants will keenly observe developments, anticipating the eventual lifting of the imposed business restrictions and the reinstatement of normal operations for JM Financial Products Ltd.
Sources By Agencies
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