‘No material deficiencies’: JM Financial issues clarification after RBI ban on lending
Upstox
2 min read • Updated: March 6, 2024, 8:00 PM
Summary
Clarifying on the RBI curbs on lending services, JM Financial said that there have been no material deficiencies in their loan sanctioning process and has not violated the applicable regulations.
JM Financial on Wednesday issued a clarification on the restrictions imposed by the Reserve Bank of India on its lending services claiming that there have been no material deficiencies in the loan sanctioning process.
In a filing to the stock exchanges the company said that its material subsidiary, JM Financial Products Ltd, has not violated the applicable regulations.
On Tuesday, the RBI placed restrictions on JM Financial Products Ltd (JMFPL) from giving loans against shares and debentures, including sanction and disbursal of loans against IPO with immediate effect.
The company said, IPO financing product has limited impact on the overall business as it constitutes 0.3% of the total net income on consolidated financials.
On RBI action, JM Financial said, “JMFPL further reaffirms that there have been no governance issues whatsoever and the conduct of all its business and operational affairs are in a bonafide manner and shall continue to service its existing customers as advised by the RBI.”
The company said that JMFPL will fully cooperate with RBI in their special audit initiative and also explain its position to the apex bank.
The company said it has carefully reviewed the order issued by the Reserve Bank in detail with regard to the action against JM Financial Products.
JM Financial’s statement said that the company has been in the business of funding IPOs for around 20 years. "The IPO financing product is short-term and self-liquidating in nature," the statement read.
In the context of IPO funding, it said, the Power of Attorney (POA) is taken as a risk containment measure only. The practice of taking POA is prevalent across the industry and is perfectly legal, it added.
Shares of JM Financial plunged by around 20% in Wednesday's trade continuing its sliding movement for the fourth straight day. After a gap-down opening, the shares of JM Financial Ltd fell to a low of ₹76.4 apiece on NSE. However, the shares later recovered some lost ground and closed 10.42% lower at 85.5 apiece.