RBI lifts restrictions on JM Financial Services from financing against shares, debentures after seven months

JM Financial Services announced on Friday, October 18, that the Reserve Bank of India (RBI) has lifted restrictions imposed on its subsidiary, JM Financial Products Ltd, regarding financing against shares and debentures.

“We wish to inform you that the RBI, vide its letter dated October 18, 2024, has lifted the restrictions imposed by it on the Company through its order dated March 5, 2024. With this communication, the Company is permitted to provide, with immediate effect, the financing against shares and debentures in compliance with all applicable laws and regulations,” said JM Financial Services in a regulatory filing to the stock exchanges.

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With RBI lifting the restrictions after seven months, the domestic brokerage is permitted to provide financing against shares and debentures with immediate effect in compliance with all applicable laws and regulations.

RBI order against JM Financial Services

On March 5, the RBI barred JM Financial Products Ltd (JMFPL) from giving loans against shares and debentures, including sanction and disbursal of loans for initial public offering (IPO) of shares with immediate effect.

“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,” said RBI in March.

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The regulator said it had conducted a limited review of JM Financial’s books on the basis of information shared by the Securities and Exchange Board of India, and found the company had repeatedly helped a group of customers bid for various IPOs and NCD offerings by using loaned funds.

Separately, capital markets regulator Securities and Exchange Board of India (SEBI) had also earlier this year barred JM Financial Services from accepting new bond issue assignments until March 2025 due to a preliminary investigation into the company and its non-bank finance business. 

JM Financial Services, which offers short-term uncollateralised loans for IPO subscriptions through its non-bank business JM Financial Products.

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