The Reserve Bank of India (RBI) has issued a directive to JM Financial Products Limited (JMFPL) to immediately cease all forms of financing against shares and debentures. This included the sanction and disbursal of loans against Initial Public Offering (IPO) shares and subscriptions to debentures. However, the company is permitted to continue servicing its existing loan accounts through regular collection and recovery procedures.
Basis of action
The RBI’s decision stemmed from significant deficiencies observed in loans sanctioned by JMFPL for IPO financing and Non-Convertible Debenture (NCD) subscriptions. The regulatory action follows a limited review of the company’s books, prompted by information provided by the Securities and Exchange Board of India (SEBI).
Immediate effect
The directive mandated an immediate cessation of all financing activities related to shares and debentures by JMFPL. This proactive measure aims to address concerns raised by the observed deficiencies and ensure the integrity and stability of the financial system.
Continued oversight
The RBI’s move underscored its commitment to vigilant oversight and regulatory enforcement within the financial sector. By swiftly intervening to address identified shortcomings, the central bank aims to uphold the highest standards of financial governance and protect the interests of stakeholders.