According to the central bank, the company may continue to carry out recovery or repossession activities through its employees.
On September 22, the Reserve Bank of India (RBI) stated that M&M Financial Services could not undertake loan recovery or repossession through outsourcing arrangements until further orders were issued.
However, according to a statement issued by the central bank, the non-banking finance company may continue to carry out recovery or repossession activities through its employees.
According to the regulator, this action is based on certain material supervisory concerns identified in M&M Financial regarding the management of its outsourcing activities.
According to PTI, a 27-year-old pregnant woman was crushed to death under the wheels of a tractor that was being forcedly driven away by a recovery agent of a finance company in Jharkhand’s Hazaribagh on September 16. According to reports, the incident occurred on September 15.
Subsequent media reports and Mahindra Group clarification confirmed that the vehicle was indeed financed by Mahindra Finance. According to media reports, the loan was made in the name of the victim’s differently abled father.
Moneycontrol reported on September 19 that the central bank might consider imposing punitive fines on M&M Finance for violating loan recovery agent recruitment norms.
While Mahindra Finance is reviewing the appointment of third-party agents for recovery purposes, NBFCs are in a bind following the RBI’s November 12 circular on asset standardisation.
Apart from requiring NBFCs to stamp non-performing assets (NPAs) daily, the circular also stated that an NPA account could not be upgraded to a standard asset category until all dues, including the compounded interest rate on the loans, are paid upfront.