The RBI on Thursday directed Mahindra Finance to immediately halt recovery of loans and repossession activity through third-party agents. The NBFC has been allowed to continue recovery or repossession activities through its own employees.
The Reserve Bank of India (RBI) said the action is based on certain material supervisory concerns observed in the company with regard to the management of its outsourcing activities. The decision comes in the wake of an incident in Jharkhand’s Hazaribagh where a recovery agent working on behalf of the non-banking financial company (NBFC) allegedly ran over a pregnant woman during the confiscation of her family’s tractor.
“The Reserve Bank of India has today, in exercise of its powers under section 45L (1)(b) of the Reserve Bank of India Act, 1934, directed Mahindra & Mahindra Financial Services Ltd. (MMFSL), Mumbai, to immediately cease carrying out any recovery or repossession activity through outsourcing arrangements, till further orders,” the regulator said in a release.
The RBI has a code in place mandating lenders to not resort to undue harassment, persistently bother borrowers at odd hours or use muscle power for recovery of loans. Despite this, incidents of harassment for loan recovery have been reported. FE