JM Financial Share Price Fell 17%; RBI Barred them From Lending Against Shares

JM Financial’s share price opened lower with a gap of approximately 17% on Wednesday, March 6, 2024, during the trading session. On Tuesday, India’s central bank RBI restricts JM Financial Limited from lending against shares and debentures due to some regulatory and governance lapses.

Reserve Bank of India has also barred JM Financial Products from sanctioning and disbursement of loans against IPOs with immediate effect. This negatively impacted the sentiment of investors, and JM Financial’s share price fell shapely in the intraday session.

Central Bank RBI conveyed that its action was necessitated due to serious deficiencies observed with respect to loans sanctioned by JM Financial for IPO financing and non-convertible debentures subscriptions.

The Reserve Bank of India said “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.”

JM Financial Denied the Allegations

In return, JM Financial denied the allegations made by RBI and issued a statement denying any material deficiencies in its lending process. The company also mentioned that they have not violated any regulations.

Regarding the IPO financing issue, JM Financial said it has been in the business of funding IPOs over the last 20 years.

The Initial Public Offering (IPO) financing product is a short term and self liquidating in nature. The POA document is taken from the client as a risk containment measure only. The practice of taking POA is the same across the industry and it’s perfectly legal.

Also Read | RBI Restrictions on Paytm Payments Bank for Accepting Deposit; Shares Down 36%

JM Financial Cooperating with RBI

JM Financial said, they are fully cooperating with RBI in their special audit initiative and explain their position to RBI.

RBI conducted a limited review on the books of JM Financial, on the information shared by the SEBI and found that JM Financial had helped the group of customers bid for various IPOs and Debenture offerings by using loaned funds.

JM Financial share price currently trading at Rs 79.40 with a decline of 16% and left a big gap in chart.

Also Read | SEBI Concern For Massive Inflows in Small-Cap and Mid-Cap Funds