JM Financial share price faced a significant decline of over 19% in the opening trade on Wednesday. This decline came after the Reserve Bank of India (RBI) took the decision to bar JM Financial Products Ltd from providing loans against shares and debentures. The RBI cited regulatory and governance lapses as the reason behind this drastic measure. The share price of JM Financial fell as much as 19.29% to Ôé╣77.10 apiece on the BSE.

In addition to the ban on loans against shares and debentures, the banking regulator also prohibited JM Financial Products from sanctioning and disbursing loans against Initial Public Offering (IPO) of shares with immediate effect. This move by the RBI was based on serious deficiencies observed in the loans sanctioned by the company for IPO financing as well as non-convertible debenture subscriptions.

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According to RBI, the action taken was necessary due to the violations of regulatory guidelines and governance issues within the company. These concerns were deemed detrimental to the interests of customers, prompting the regulatory intervention.

Despite the RBI’s allegations, JM Financial Group issued a statement denying any material deficiencies in its loan sanctioning process. The company maintained that it has not violated any applicable regulations and reiterated its commitment to serving its existing customers as advised by the RBI.

On the issue of IPO financing, JM Financial clarified that it has a long-standing history of funding IPOs over the past two decades. The company emphasized the self-liquidating nature of the IPO financing product and defended the practice of taking Power of Attorney (POA) as a risk containment measure.

RBI conducted a limited review of JM Financial’s books based on information provided by the Securities and Exchange Board of India (SEBI). The review revealed instances where the company facilitated a group of customers to bid for various IPOs and NCD offerings using loaned funds.

Despite the regulatory actions, JM Financial’s capital market loan book stood at Ôé╣978 crore by the end of December, accounting for about 6% of its overall loan book valued at Ôé╣15,111 crore. The market response to the developments saw JM Financial shares trading 14.61% lower at Ôé╣81.57 apiece on the BSE.

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