RBI's Hammer Falls: Loan Restrictions.!
Following information sharing by the Securities and Exchange Board of india (SEBI), the RBI conducted a review of the company's books, leading to the imposition of these restrictions. According to the RBI statement, the review uncovered instances where the company was financing a specific group of customers for IPO and Non-Convertible Debenture (NCD) subscriptions. Notably, these loans were extended at very low margins.
Additionally, the company, by obtaining power of attorney from these customers, was actively involved in managing subscription applications, demat accounts, and bank accounts. In effect, JM Financial Products Limited was simultaneously serving as both a lender and borrower, as well as acting as an arranger and operator for opening bank accounts through power of attorney.
The RBI highlighted various flaws in JM Financial Products' loan approval processes, citing regulatory rule violations and governance issues. Alongside the imposed restrictions, the RBI announced plans for a special audit to be conducted, followed by a comprehensive review. This regulatory action underscores the central bank's commitment to maintaining the integrity of financial systems and enforcing compliance within the banking sector.