The share price of Mahindra & Mahindra Financial Services Limited plunged more than 14 percent on Friday, a day after the Reserve Bank of India (RBI) barred it from using outside recovery agents.
On the BSE, Mahindra & Mahindra Financial Services Limited’s share traded 11.42 percent lower against Rs 198.20. The scrip crashed to an intra-day low of Rs 192.05 against the previous day’s close at Rs 223.75.
The Reserve Bank of India announced on Thursday that it has instructed Mahindra & Mahindra Financial Services Ltd (MMFSL) to “immediately cease conducting any recovery or repossession activities through outsourcing agreements, until further notice.”
However, the said NBFC may continue to conduct recovery or repossession activities through its own employees, the RBI said.
This move is based on certain material oversight issues observed in the said NBFC, regarding the management of its outsourcing activities, the central bank added.
Commenting on the RBI action, Mahindra & Mahindra Financial Services Limited said: “In the normal course of business, the company is taking back approximately 4,000 to 5,000 vehicles per month, using outside agencies and its own employees. The company expects this number to be temporary. down by about 3,000 to 4,000 per month as the company is executing the RBI order effective immediately.”
“The company has not outsourced any of the collection activities in its auto financing activities to outside agencies and therefore the company does not expect any impact on the collections in this company. As of June 30, 2022, the number of contracts under phase 3 was 1.35 Lac and the company had a sufficient provision of 58 percent on these assets (including 100 percent provision on contracts with an age of 18 months),” said Mahindra & Mahindra Financial Services Limited in a regulatory filing with the exchanges.
The vehicles impounded are usually classified under Stage 3 and therefore this temporary cessation of repossession activity with the help of outside agencies is not expected to have a material impact on finances or on Net Stage 3, it said.
(You can, follow The Singapore Time staff and has been published Platforms.)