RBI yesterday, barred JM Financial Products from providing any form of financing against shares and debentures, including sanction and disbursal of loans against initial public offering, as well as against subscription to debentures, with immediate effect.

However, RBI said that it could continue to service its existing loan accounts through the usual collection and recovery process.

Why did RBI take this serious action? RBI said that this was necessitated due to certain serious deficiencies observed with respect to loans sanctioned by the company for IPO financing as well as NCD subscriptions. It was found that JM repeatedly helped a group of its customers to bid for various IPO and NCD offerings by using loaned funds. RBI also found serious governance issues on part of the company.

This finding was post the limited review of the books conducted by RBI, based on the information shared by SEBI.

Following this, the stock price opened 19% lower today morning at Rs.77.10, very close to its 20% LC of the day at Rs.76.43. Volumes are up 13.5x. It is currently among the top three losers on the BSE.