RBI bans Mahindra Finance from outsourcing recovery activity to third party
The Reserve Bank of India (RBI) on Thursday banned Mahindra & Mahindra Financial Services from using private agents for recovery or repossession activity until further notice.
It did not, however, prohibit the company from carrying out the recovery activity through its employees.
RBI's ban came after a 27-year-old pregnant woman was allegedly crushed to death, earlier this week, under a tractor which was forcibly driven away by the recovery agent of Mahindra & Mahindra Financial Services in the Hazaribagh district of Jharkhand.
The woman was the daughter of the specially-abled farmer, who had taken the loan. She had reached the spot and ran after the vehicle and was crushed to death under its wheels. She was three-months pregnant.
In a statement, RBI said, "directed Mahindra & Mahindra Financial Services Ltd. (MMFSL), Mumbai, to immediately cease carrying out any recovery or repossession activity through outsourcing arrangements, till further orders."
"However, the said NBFC may continue to carry out recovery or repossession activities, through its own employees," it added.
RBI said, "this action is based on certain material supervisory concerns observed in the said NBFC, with regard to the management of its outsourcing activities."
Later, Mahindra Group's CEO and MD Anish Shah had said, "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."