RBI Bans Mahindra To Outsource Loan Recovery Operations After An Unfortunate Death (Full Details)
On September 22, citing “material supervisory concerns”, The Reserve Bank of India on Thursday directed Mahindra and Mahindra Financial Services (MMFSL) to stop using third-party services for loan recovery until further orders.
No Third Party Recovery For MMFSL Till Further Orders
In the statement undersigned by Chief General Manager, the bank said that “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 MMFSL, Mumbai, to immediately cease carrying out any recovery or repossession activity through outsourcing arrangements, till further orders”.
RBI said that this action is based on certain material supervisory concerns observed in the said NBFC, about the management of its outsourcing activities. The NBFC may continue to carry out recovery or repossession activities, through its own employees.
RBI added that about the management of its outsourcing activities, this action is based on certain material supervisory concerns observed in the said NBFC.
But why such a decision by RBI?
The reason behind this is the fact that recently there was an incidence reported wherein a 27-year-old pregnant woman being crushed to death trying to stop a loan recovery agent, working on behalf of MMFSL, from seizing her father’s tractor over loan dues in Jharkhand’s Hazaribagh.
Mahindra Group CEO Anish Shah in a statement on Twitter said that “We will investigate this incident from all aspects and will also undertake an examination of the practice of using third-party collection agencies that has been in existence”.
MMFSL did not immediately respond to a Reuters request for comment on RBI’s directive.
More About MMFSL
Headquartered in Mumbai, Mahindra & Mahindra Financial Services Limited is an Indian rural NBFC which was started on 1 January 1991, as Maxi Motors Financial Services Limited.
It is one of country’s top tractor financers and also has more than 1000+ offices across the country.