JM Financial Share Price Drops 19% After RBI Bans Loan Against Shares

JM Financial's share price fell sharply on Wednesday after the Reserve Bank of India (RBI) banned its subsidiary, JM Financial Products Ltd, from offering loans against shares and debentures due to regulatory and governance concerns.

Key Points:

• Share Price Drop: JM Financial's share price opened 19% lower on the Bombay Stock Exchange (BSE) at ₹77.10 per share.
• RBI Ban: The banking regulator banned JM Financial Products from providing loans against shares and debentures, including those for initial public offerings (IPOs).
• Reasons for Ban: RBI cited "serious deficiencies" in loans sanctioned by the company for IPO financing and non-convertible debenture (NCD) subscriptions, along with concerns about governance issues.
• JM Financial's Response: The company denied any major shortcomings in its loan approval process and claimed it complied with all regulations. They also emphasized their commitment to ethical business practices and customer service.
• IPO Financing: JM Financial clarified its two-decade experience in IPO financing and the standard industry practice of using power of attorney (POA) as a risk management measure. They pledged full cooperation with the RBI's audit and expressed confidence in their position.
• RBI's Investigation: The central bank's limited review, prompted by information from the Securities and Exchange Board of India (SEBI), reportedly revealed that JM Financial helped a group use borrowed funds to bid for IPOs and NCDs.
• Current Status: As of 9:20 am, JM Financial shares were trading 14.61% lower at ₹81.57 per share on the BSE.

This situation highlights the importance of responsible lending practices and adherence to regulations in the financial sector.

It's important to note that this is an evolving story, and further developments might be reported.