JM Financial witnessed a significant decline in its share value, dropping by over 15 percent on Wednesday, following strict regulatory action taken by the Reserve Bank of India (RBI) against the investment banking firm.
Despite assertions by the company that there were no identified deficiencies in its unit's loan sanctioning process, JM Financial experienced a notable downturn in its stock performance. This occurred in the wake of the RBI's decision to prohibit the firm from extending loans against shares and debentures.
In response to these developments, a spokesperson from JM Financial emphasized that they firmly believe there have been no significant shortcomings in their loan sanctioning procedures. The spokesperson reiterated that the company has upheld applicable regulations and maintained a high standard of governance in all its operations.
Despite these assurances, JM Financial's shares plummeted by 15.40 percent to Rs 80.82 apiece at 9:50 am.
The regulatory action taken by the RBI against JM Financial Products stemmed from concerns over regulatory violations and governance issues. An examination of the company's records revealed instances where it facilitated a group of customers to participate in various IPO and non-convertible debenture offerings using borrowed funds. This raised apprehensions regarding compliance with regulatory standards and the safeguarding of customer interests.
It's worth noting that the RBI has intensified its scrutiny of banks and non-bank finance companies to ensure strict adherence to regulatory mandates. In a similar vein, the central bank directed non-bank finance company IIFL Finance to halt its provision of gold loans due to "material supervisory concerns" within its gold loan portfolio, leading to a 20 percent decline in the company's shares on a preceding day.
