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JM Financial provides insights on violations with regulatory norms and governance concerns following the RBI directive.

JM Financial Products has been stopped from providing loans against shares and debentures by the Reserve Bank of India. JM Financial reviewed the order and believes there were no major problems with its loan approval process. The company claims it did not break any rules and has good governance practices. JM Financial will keep serving its current customers as per RBI guidance.

A spokesperson from JM Financial said the company has been funding IPOs for 20 years. The IPO financing is short-term and self-liquidating. The spokesperson mentioned that taking a Power of Attorney (POA) is a risk containment measure in IPO funding. This practice is common in the industry and is legal.

He stated that JM Financial will fully cooperate with the central bank's special audit program and clarify its stance. The RBI prohibited JM Financial Products from approving and distributing loans for initial public offerings (IPOs) and debenture subscriptions. This action was taken because of significant issues found in the loans provided by the company for IPO funding and NCD subscriptions. The RBI conducted a brief review of the company's records based on information from SEBI.

The company was found to have assisted a specific group of customers in bidding for IPO and NCD offerings by providing borrowed funds during a limited review. The credit assessment process was found to be superficial, with financing being granted against minimal margins. Furthermore, the company managed the subscription applications, demat accounts, and bank accounts of these customers using a Power of Attorney and a Master Agreement without their direct involvement in the subsequent operations, as stated by the RBI previously.

The RBI is currently investigating any regulatory violations and deficiencies by banks independently. Business restrictions will be reconsidered after a special audit conducted by the RBI and once the identified deficiencies are rectified to the RBI's satisfaction.

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