“Deficits in IPO Funding”: RBI Places Restrictions on JM Financial Products; View Details Here
After discovering that JM Financial Products Ltd. engaged in a number of manipulations, including continuously assisting a group of its clients to bid on several initial public offerings (IPOs) by utilizing borrowed money, the Reserve Bank of India placed limitations on the business on Tuesday.
The limitations are in place right now.
The systemically important non-deposit-taking NBFC has been prohibited by the central bank from offering any kind of financing against shares and debentures, including the approval and disbursement of loans against share initial public offerings (IPOs) and debenture subscriptions. This is a significant regulatory action.
In addition to ordering the business to “cease and desist” from financing operations, the Reserve Bank of India (RBI) said that it is independently looking into any potential regulatory infractions and shortfalls on the part of the relevant institutions.
JM Financial Products is permitted to go on with its current loan accounts by following standard procedures for collection and recovery.
As per the RBI, the proceedings were deemed necessary because of several grave inadequacies found concerning loans approved by the business for funding their initial public offering (IPO) and subscriptions of non-convertible debentures (NCDs).
The market regulator’s information was used by the RBI to conduct a cursory examination of JM Financial Products’ records.
“Among other things, the limited assessment revealed that the business often used lent cash to assist a group of its clients in placing bids on different IPO and NCD issues. The RBI said that the financing was done on very thin margins and that the credit underwriting was deemed to be ineffective.
Without their consent or cooperation in any way, the corporation used a Power of Attorney (POA) and a Master Agreement that it had secured from these consumers to manage the subscription application, the demat accounts, and the bank accounts.
As a result, the RBI said, “The company was able to act as both a lender and a borrower.”
The central bank said that JM Financial Products operated the aforementioned bank accounts utilizing the POA and served as both the arranger and the operator of the bank account opening.
The statement said, “In addition to breaking regulatory requirements, there are significant concerns regarding governance issues within the company, which in our opinion are detrimental to the interests of the customers.”
The statement states that the business limitations will be reevaluated when a special audit is finished and the faults have been fixed to the RBI’s satisfaction.
It also said that these business limitations do not preclude the RBI from taking further regulatory or supervisory action against the firm.
A wide range of loan options are available from JM Financial Options. According to its website, it functions primarily under five verticals: capital market finance, retail mortgage financing, customized financing, financial institution financing, and real estate financing.
The Reserve Bank of India periodically reviews the nation’s financial system and takes appropriate measures. The regulator’s most recent action also coincides with the day it imposed several restrictions, including a ban on IIFL Finance Ltd.’s ability to disburse gold loans, due to supervisory concerns.
The business may, however, keep servicing its current gold loan portfolio using the customary procedures for collection and recovery, according to the RBI.
