RBI Asks JM Financial Group Company To Stop Lending Against Shares

The Reserve Bank of India (RBI) will be conducting a deep review into the financing business of group companies of Mumbai-based JM Financial, sources told BW. On Tuesday, the RBI ordered JM Financial Products, a group company of JM Financials, to cease and desist from new deals, mainly lending against shares. 

RBI Investigations and information into various dealings of JM Financial group company emanated from a probe being conducted by market regulator SEBI with regard to an open offer given by FMCG major Dabur to acquire financial services company Religare enterprise. JM Financial is a financial advisor to Dabur in the deal and SEBI is studying various aspects of the deal and the fall in the share price of Religare Enterprises post the announcement of the offer, sources said.

Currently, the RBI carried out a limited review of JM Financial Products on the basis of information shared by SEBI, the banking regulator said. RBI has directed JM Financial Products to cease and desist, with immediate effect, from doing 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. The company can continue to service its existing loan accounts through the usual collection and recovery process, RBI said.

RBI said its action was necessitated due to certain serious deficiencies observed with respect to loans sanctioned by the company for IPO financing as well as NCD subscriptions. The RBI carried out a limited review of the books of the company on the basis of the information shared by SEBI.

Earlier, Sebi had asked Religare for complete details and the sequence of events starting from the time of the first discussion regarding the open offer transaction till the stock exchange announcement on 25 September 2023. JM Financial served as the exclusive financial advisor and was overseeing the management of the open offer. Reportedly, SEBI has also asked for details of Burmans’ shareholding in Religare from 1 January 2018 till date. 

The Burman Family of Dabur had picked their first stake in the company in 2018 at 10 per cent, which was eventually increased to 14 per cent and later to 22 per cent before they announced their open offer for an additional 26 per cent stake and a proposal to acquire 5 per cent from the secondary market. Burmans has maintained that there was no cause for alarm in SEBI's investigations. SEBI is also inquiring into the sale of shares by Religare chairperson Rashmi Saluja immediately before the Burman family announced an open offer for the financial services conglomerate. Burman and Saluja are at loggerhead.

Palak Shah

BW Reporters The writer is author of the book: The Market Mafia - Chronicle of India’s High-Tech Stock Market Scandal & The Cabal That Went Scot-Free. Palak has been a journalist in Mumbai for nearly two decades now. He has worked for most premier pink papers including The Economic Times, Business Standard and The Financial Express and The Hindu Business Line. He was drawn to crime reporting at the age of 19 but a few years in the field told him that the fabric of crime had changed and the organised gangs, as Mumbai had witnessed during the eighties, no longer existed. It was business and markets that dominated the scenario. His passion to unravel the intricacies of the ‘white money’ economy led Palak to the world of finance and regulations.