RBI Bans JM Financial For IPO Financing, Loan Against Shares

RBI Bans JM Financial For IPO Financing, Loan Against Shares with immediate effects – JM Financial has been barred from giving out loans against IPO of shares and against subscription to bonds, but it can continue to service existing loan accounts through the usual collection and recovery process, says RBI.

JM Financial has been barred from giving out loans against IPO of shares and against subscription to bonds, but it can continue to service existing loan accounts through the usual collection and recovery process, says RBI.

During the inspection of the firm, it was found out that the company repeatedly helped a group of its customers to bid for various IPO and NCD offerings by using loaned funds. The credit underwriting was found to be perfunctory, and financing was done against meagre margins.

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RBI further said that the application for subscription, the demat accounts and the bank accounts, all were operated by the company using a Power of Attorney (POA) and a Master Agreement obtained from these customers without their involvement, whatsoever, in the subsequent operations.

“Consequently, the company was able to effectively act as both lender as well as borrower,” RBI said.