JM Financial Responds to RBI Curbs

Thorough Review and Assertions

JM Financial responded to the Reserve Bank of India’s (RBI) restrictions on its financing business, stating that it conducted a comprehensive review of the situation. The company asserted that there were no significant deficiencies in its loan sanctioning process, despite the RBI’s order. JM Financial Products Ltd faced restrictions after the RBI found instances of manipulative practices, including aiding customers in bidding for IPOs using loaned funds.

Firm Stand

In a statement, a spokesperson for JM Financial emphasized that the company had not violated any regulations and reaffirmed its commitment to governance integrity. The spokesperson clarified that JM Financial conducts all its business operations in good faith. The company intends to continue serving its existing customers as per the RBI’s directives.

IPO Financing Practices

JM Financial clarified that its practice of financing IPOs has been ongoing for over two decades. They described their IPO financing product as short-term and self-liquidating. Additionally, they stated that obtaining Power of Attorney (POA) is a common risk containment measure in the industry and is legally permissible.

Regulatory Actions and Observations

The RBI’s restrictions prohibit JM Financial Products from offering any form of financing against shares and debentures, including loans against IPO shares and debenture subscriptions. The RBI cited serious deficiencies in the company’s loan sanctioning process, particularly related to IPO financing and NCD subscriptions.

Limited Review Findings

Based on a limited review conducted by the RBI, it was observed that JM Financial repeatedly facilitated a group of customers in bidding for IPOs and NCD offerings using borrowed funds. The RBI found deficiencies in credit underwriting and highlighted concerns about governance issues within the company.

Path Forward

JM Financial’s business restrictions will be reevaluated after a special audit and upon rectification of identified deficiencies to the RBI’s satisfaction. Meanwhile, the company’s shares experienced a significant decline following the regulatory actions.

Market Impact

Shares of JM Financial witnessed a sharp decline, plummeting over 19% on major stock exchanges. The company’s market capitalization also took a hit, indicating investor concerns over the regulatory curbs.

Company Overview

JM Financial Products offers various loan products across different verticals, including capital market financing, retail mortgage financing, bespoke financing, financial institution financing, and real estate financing.