Mahindra Finance is prohibited by RBI from utilising outside recovery agents. The central bank’s action followed claims that a 27-year-old lady was fatally run over by a tractor in Jharkhand’s Hazaribagh district by third-party debt collection agents working for M&M Finance. The central bank also said that the management of M&M Finance’s outsourcing activities had raised some serious supervisory concerns.
The Reserve Bank of India (RBI) ordered Mahindra Financial Services to stop utilising third-party services for debt recovery the day before, and the business indicated today in an exchange filing that it anticipates car repossession activity to temporarily decline.
The regulator continued that this action is predicated on several substantial supervisory concerns found in the aforementioned NBFC, with reference to the management of its outsourced activities. The Reserve Bank of India Act of 1934’s section 45L(1)(b) gives the RBI the authority to take the measure.
Mahindra & Mahindra Limited (M&M) is an Indian multinational vehicle manufacturing company with its headquarters in Mumbai. The business was established on October 2, 1945, in Mumbai, India, by Jagdish Chandra Mahindra, Kailash Chandra Mahindra, and Ghulam Mohammed. It was under the name Mahindra & Muhammad and changed to Mahindra & Mahindra subsequently. M&M, a member of the Mahindra Group, is one of India’s top car producers by production.
The segments it operates through include Automotive, Farm Equipment, and Others. The automotive segment consists of the sale of vehicles, related services, and replacement components. Tractors and their replacement components are sold in the farm equipment industry. Agri, construction equipment, Powerol, and parts business units are included in the others sector.
Following the Reserve Bank of India’s (RBI) prohibition against hiring third-party recovery agents, the share price of Mahindra Finance fell more than 14% on Friday.
According to media reports, a pregnant lady in Jharkhand died after reportedly being run over by a tractor operated by a recovery agent for the financing firm in the state’s Hazaribagh area. This led the central bank to issue its directive.
Mahindra & Mahindra Financial Services Limited responded to the RBI action by saying that the Company, employing both its own staff and third-party agencies, repossesses between 4,000 and 5,000 automobiles each month as part of its regular business operations. The company anticipates a temporary decrease in this amount of between 3000 and 4000 per month as it immediately executes the RBI instruction.
While Mahindra Finance is reviewing the hiring of third-party agents for recovery reasons, NBFCs are in a difficult position as a result of the RBI’s circular on the standardisation of assets from November 12. The circular further specified that an NPA account cannot be converted to a regular asset category until all outstanding debts, including the compounded rate of interest on the loans, are paid in full. The circular mandated that NBFCs stamp non-performing assets (NPAs) daily.
The regulator continued that this action is predicated on several substantial supervisory concerns found in the aforementioned NBFC, with reference to the management of its outsourced activities. The Reserve Bank of India Act of 1934’s section 45L(1)(b) gives the RBI the authority to take the measure.
