Mumbai (Maharashtra) [India], September 23 (ANI): The share price of Mahindra & Mahindra Financial Services Limited crashed by more than 14 per cent on Friday a day after the Reserve Bank of India (RBI) barred it from using third-party recovery agents.
On the BSE, the share of Mahindra & Mahindra Financial Services Limited was trading 11.42 per cent down at Rs 198.20. The scrip crashed to a low of Rs 192.05 in the intra-day against its previous day's close at Rs 223.75.
The Reserve Bank of India on Thursday announced that it has directed Mahindra & Mahindra Financial Services Ltd (MMFSL) 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, the 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, the central bank added.
Reacting on the RBI action, Mahindra & Mahindra Financial Services Limited said, "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."
"The Company has not outsourced any collection activities in its vehicle finance business to any third-party agencies and therefore, the Company does not expect any impact on the collections in this business. 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 per cent on these assets (inclusive of 100 per cent provision on contracts with age of 18+ months)," Mahindra & Mahindra Financial Services Limited said in a regulatory filing to the stock exchanges.
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, it said. (ANI)