Mahindra and Mahindra Financial Services Ltd has issued a statement following Reserve Bank of India’s order on September 22. The company has said that it expects its repossessing activity to be affected following RBI’s order.
“In the normal course of its business, the Company repossesses about 4000 to 5000 vehicles per month, using the third-party agencies and its own employees. The Company expects this number to go down temporarily by about 3000 to 4000 per month, as the Company implements the RBI order with immediate effect,” it said in a filing.
This response is in connection to RBI’s order from September 22 that directed the company to immediately cease carrying out any recovery or repossession activity through outsourcing arrangements.
“The Reserve Bank of India has today, in exercise of its powers under section 45L(1)(b) of the Reserve Bank of India Act, 1934, directed Mahindra & Mahindra Financial Services Ltd. (MMFSL), Mumbai, to immediately cease carrying out any recovery or repossession activity through outsourcing arrangements, till further orders. However, the said NBFC may continue to carry out recovery or repossession activities, through its own employees. This action is based on certain material supervisory concerns observed in the said NBFC, with regard to the management of its outsourcing activities,” stated the apex bank.
Mahindra Finance said that it has not outsourced any collection activities in its vehicle finance business to any third-party agencies and does not, hence, expect any impact on its collections in this particular business.
“As on 30th June 2022, the count of contracts under Stage 3 was 1.35 Lac and the Company carried a sufficient provision of 58 per cent on these assets (inclusive of 100% provision on contracts with age of 18+ months). The vehicles that are repossessed are mostly classified under Stage 3 and therefore, this temporary halt to repossession activity using the third-party agencies is not expected to have any material impact either on the financials or on Net Stage 3,” it said.
The RBI’s order comes after a pregnant woman was crushed to death under a tractor that was being forcibly taken away by recovery agents in Hazaribagh district of Jharkhand. A 26-year-old man, Roshan Singh who was a third party vendor engaged by the company, was arrested by the Hazaribagh Police.
Also read: RBI bars Mahindra Finance from carrying out recovery through third-party days after pregnant woman’s death