open demat account

The shares of Mahindra and Mahindra (M&M) Financial Services Limited suffered deep cuts on Friday’s intraday trade after the Reserve Bank of India directed the company to immediately cease any recovery or repossession activities via an outsource till further orders. 

The shares reached a low of ₹ 192.05 apiece on Friday, after closing at 223.70 apiece on Thursday’s closing bell, down 14.15%, in contrast to a 0.78% decline in the Nifty 50. A combined 29 million shares changed hands on the bourses by 12:09 PM on Friday. 

Espresso in content banner September 2022

M&M Financial Services violated the central bank’s guidelines on recovery agents under the business responsibility policy. In a gruesome incident, one of its third-party recovery agents ran over a borrower’s pregnant daughter while seizing a tractor. On September 15, the 27-year-old woman from Hazaribagh, Jharkhand, was trying to stop the agent from seizing her father’s tractor over loan dues. She came under the tractor’s wheels during the melee. 

“The action is based on certain material supervisory concerns observed in the said non-banking finance company (NBFC), with regard to the management of its outsourcing activities. However, the NBFC may continue to carry out recovery or repossession activities, through its own employees,” the RBI directed. 

The East (including Jharkhand) makes up for 25% of the NBFCs’ business assets, and 20% of its disbursements as of June 2022. Such incidents are rare from an established NBFC, that too just a month after the central bank came out with a circular on August 12. 

“Reserve Bank of India has from time to time advised regulated entities (REs) that the ultimate responsibility for their outsourced activities vests with them and they are, therefore, responsible for the actions of their service providers including recovery agents,” according to the circular. Further, it added that any violation in this regard by REs will be viewed seriously. 

FinGrad In-content Banner

However, the company said that they repossess anywhere between 4,000 to 5,000 vehicles per month in the daily course of business. This includes vehicles recovered by their employees as well as by third-party agents. They added that they expect this number to go down temporarily to around 3,000 to 4,000 per month, as they have implemented the apex bank’s order with immediate effect. 

Analysts at ICICI Securities believe that the order could impact the recovery process of the company in the near term and drive negative investor sentiments. 

Written by Simran Bafna 

Source – Tradebrains.in

To stay updated with the Latest Stock Market news, download our app here!

For editorial purposes, contact news@tradebrains.in

Start Your Financial Learning Journey

Want to learn Stock Market and other Financial Products? Make sure to check out, FinGrad, the learning initiative by Trade Brains. Click here to Register today to Start your 3-Day FREE Trail. And do not miss out on the Introductory Offer!!