RBI Lifts Restrictions On JM Financial Products

JM Financial Ltd said on Friday that that the Reserve Bank of India has lifted restrictions on its unit JM Financial Products Ltd.’s financing activities with immediate effect. The company confirmed that it can now resume providing loans against shares and debentures, following the RBI's decision, according to its statement to the exchanges.

The central bank had initially imposed the restrictions in March, directing JM Financial Products to stop all forms of financing against shares and debentures. This included loans for initial public offerings and subscriptions to non-convertible debentures due to concerns over deficiencies in the company’s lending practices.

The RBI's actions were based on a limited review of the company's operations, which was conducted after receiving information from the Securities and Exchange Board of India.

The review found that JM Financial had encouraged certain customers to participate in IPOs and NCD issuances using borrowed funds, while the credit underwriting process was found to be inadequate, with financing provided against minimal margins. The central bank also highlighted broader governance issues, prompting further scrutiny of the company’s practices.

Following the RBI's initial restrictions, SEBI barred JM Financial from taking new mandates as a lead manager for public issues of debt securities. In June, SEBI confirmed that the company would remain under restrictions until March 31, 2025. This decision followed an interim order issued on March 7, which JM Financial did not contest.

“The company is committed to provide financing against shares and debentures in compliance with all applicable laws and regulations,” it said in a statement.

Shares of JM Financial ended 1.8% higher at Rs 158.69. That compared with 0.4% gains in the country’s benchmark NSE Nifty 50. The scrip had advanced 30% in the past 30 days.