RBI order to affect vehicle repossession, but won’t affect collection activities: Mahindra

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Biznextindia : Mahindra & Mahindra Financial Services (MMFSL) on Friday said that its vehicle repossession process will be affected due to Thursday’s RBI order. The company has estimated that the number of vehicles the company repossesses every month could dip by 20-25 percent.

“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” said MMFSL.

However, the company said that it does not 3rd party agencies for collection activities. So the RBI order will not have any impact on its collection activities.

“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% 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” the company added.

The RBI on Thursday directed MMFSL to immediately cease carrying out any recovery or repossession activity through outsourcing arrangements, till further orders. However, the central bank has allowed the NBFC to 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.

The Hazaribagh loan recovery incident 

The RBI action is said to be based on the murder of a pregnant woman in Jharkhand’s Hazaribagh on September 15. The 27-year-old woman started arguing with a debt collector because of unpaid loan obligations. As a result, a loan recovery agent ran over a pregnant lady, and she lost her life.

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