Shares of JM Financial surged over 6 percent in intra-day deals on Monday, October 21 after the Reserve Bank of India (RBI) lifted restrictions on the company’s subsidiary, JM Financial Products.
The central bank had restricted JM Financial Products from funding shares and bonds due to regulatory lapses and governance issues. However, the RBI has now lifted these restrictions, which lasted nearly seven months.
JM Financial Products is a systemically important non-deposit-taking non-banking finance company (NBFC) registered with the RBI.
“We wish to inform you that the RBI, vide its letter dated October 18, 2024, has, with immediate effect, lifted the restrictions imposed by it on JM Financial Products Limited, a material subsidiary of the Company,” JM Financial informed in a regulatory filing on Friday.
With this communication, JM Financial Products is permitted to provide, with immediate effect, the financing against shares and debentures in compliance with all applicable laws and regulations, the company added.
It further said that JM Financial Products “is committed to upholding the highest standards of compliance and will continue to ensure that the remediations carried out are sustained.”
Following this development, the stock rallied as much as 6.39 percent to the day’s high of ₹168.85. JM Financial’s share price had opened at ₹164.60 against its previous close of ₹158.70. At 10.35 am, the stock was trading at ₹161.55, up 1.80% on the BSE.
Details of RBI Restriction
The central bank of March 5, 2024, had restricted JM Financial Products from undertaking any form 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.
This action is necessitated due to certain serious deficiencies observed in respect of loans sanctioned by the company for IPO financing as well as NCD subscriptions, RBI had said in its order dated March 5.
In recent years, RBI has focussed on ensuring that banks and non-bank financial companies follow the rules more closely.
Recently, the central bank imposed restrictions on four non-banking finance companies regarding the sanction and disbursal of loans amid concerns over their loan pricing practices.
The article originally appeared on Mint.
