RBI action against JM Financial Products, ban on giving loans for applications in shares – debentures, IPO

RBI action against JM Financial Products, ban on giving loans for applications in shares – debentures, IPO

RBI Update: Banking sector regulator Reserve Bank of India, taking major action against JM Financial Products Limited, has banned the company from giving loans against shares and debentures. RBI has also decided to ban giving loans for IPO. This order of RBI has come into effect immediately. 

RBI has informed about this decision by issuing a press release on March 5, 2024. RBI said that it has taken this action under the powers given to it under Section 45L(1)(b) of the Reserve Bank of India Act 1934. RBI has banned JM Financial Products Limited from giving loans against shares and debentures and has also decided to stop giving loans for subscription of shares or debentures in IPO. However, the company will continue to service its existing loan accounts through collection and recovery process. 

RBI has taken this action after finding serious irregularities in the loan given by the company for IPO financing along with non-convertible debentures. After sharing the information by SEBI, RBI had reviewed the books of JM Financial Products Limited, after which this order has come from RBI.  

RBI said in its statement that in its review against the company, it found that the company funds a specific group of customers by giving loans to apply for IPO and NCD offering. This loan was being given on very low margins. By taking power of attorney from these customers, the company was operating subscription applications, demat accounts and bank accounts. The company was simultaneously acting as both a lender and borrower. The company was also working as an arranger and operator through power of attorney for opening bank accounts. RBI said that many types of flaws were found in the loan granting process of JM Financial Products. Is. Along with violation of regulatory rules, there is also a serious issue of governance. RBI said that along with imposing these restrictions, a special audit will be conducted after which a review will be done. 

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