M&M Finance loses 14% as the RBI prohibits them from employing outside recovery agencies

The Reserve Bank of India barred Mahindra & Mahindra Financial Services Ltd from using third-party recovery agents . The scrip fell to a low of Rs 192.05 in the intra-day relative to its previous days close at Rs 223.75 .

Mumbai (Maharashtra) India: On Friday, Mahindra & Mahindra Financial Services Limited's stock fell more than 14%, after being barred from using third-party recovery agents by the Reserve Bank of India (RBI).The scrip fell to a low of Rs 192.05 in the intra-day relative to its previous days close at Rs 223.75.The Reserve Bank of India (RBI) announced on Thursday that it had directed Mahindra & Mahindra Financial Services Ltd (MMFSL) to immediately cease any recovery or repossession activity through outsourcing arrangements until further orders are made.However, Mahindra & Mahindra Financial Services Limited said, the said NBFC may continue to carry out recovery or repossession activities through its own staff, as a result of certain material supervisory shortcomings identified in the said NBFC in terms of the operation of its outsourcing activities.As the Company implements the RBI order with immediate effect, the number of employees working in its vehicle finance practice is expected to decrease by about 3000 to 4000 per month.

In a regulatory filing to the stock exchanges, Mahindra & Mahindra Financial Services Limited said that the count of contracts under Stage 3 was 1.35 Lac as of June 2022, and that the Company had a sufficient provision of 58% on these assets (inclusive of a 100 percent provision on contracts with an age of 18+ months), and that this temporary suspension of repossession activities by the third-party providers is not likely to have any impact on the financials or Net Stage 3.