The central bank’s move came after reports that third-party loan recovery agents working on behalf of M&M Finance allegedly ran over a 27-year-old woman with a tractor in Hazaribagh district of Jharkhand, causing her death.
“The Reserve Bank of India has directed Mahindra & Mahindra Financial Services to immediately cease carrying out any recovery or repossession activity through outsourcing arrangements, till further orders,” a notification issued by the RBI said. “However, the said NBFC may continue to carry out recovery or repossession activities, through its own employees.”
The central bank added that it’s action is based on certain material supervisory concerns observed in M&M Finance with regard to the management of its outsourcing activities.
Local media reported that recovery agents were in the process of taking possession of a tractor, after the farmer defaulted on a loan. Though an argument took place between the farmer, his daughter and the recovery agents, during the incident.
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“We are deeply saddened and disturbed by the Hazaribagh incident,” Dr. Anish Shah, MD & CEO, Mahindra Group has said last week. “A human tragedy has occurred. 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.
We will extend all possible support to the authorities during the investigation into this tragic incident and, above all, we stand with the family in this moment of grief”.