JM Financial Products Ltd, a non-banking financial company (NBFC) and a subsidiary of JM Financial Group, has issued a statement claiming that there have been no material deficiencies in its loan sanctioning process, after the Reserve Bank of India (RBI) imposed restrictions on its financing activities on Tuesday.
RBI curbs on JM Financial
The RBI had barred the systemically important non-deposit-taking NBFC from providing any kind of financing against shares and debentures, including sanction and disbursal of loans against Initial Public Offering (IPO) of shares as well as against subscription to debentures, with immediate effect.
The RBI had also directed the entity to “cease and desist” from financing activities and said it was separately examining any possible regulatory violations and deficiencies on the part of the banks concerned.
The RBI had said that the actions were “necessitated due to certain serious deficiencies observed in respect of loans sanctioned by the company for IPO financing as well as NCD (Non-Convertible Debentures) subscriptions”.
JM Financial’s response
In its statement, JM Financial Products said that it had carefully and detailedly reviewed the order issued by the RBI and strongly believed that there had been no material deficiencies in its loan sanctioning process.
“Further, the company has not violated applicable regulations. The company has always followed prudent risk management practices and has maintained adequate capital adequacy ratio at all times,” it said.
The company also said that it had been servicing its existing loan accounts through the usual collection and recovery process and that it had adequate liquidity to meet its obligations.
The company added that it was in constant dialogue with the RBI to resolve the matter at the earliest and that it was confident of resuming its normal business operations soon.
Market reaction
The shares of JM Financial Ltd, the parent company of JM Financial Products, fell sharply on Wednesday following the RBI’s action. The stock declined more than 19 per cent to touch Rs 77.10 per share on the BSE, while it plunged 18.75 per cent to reach Rs 77.55 apiece on the NSE, reported PTI.
JM Financial Group is one of India’s leading financial services groups, offering investment banking, institutional equity sales, trading, research and broking, wealth management, asset management, alternative asset management, financing, mortgage lending and distressed asset management services.
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