RBI directs Mahindra Finance to stop outsourcing its recovery activity through agents

The Reserve Bank of India (RBI) on Thursday barred Mahindra & Mahindra Financial Services from carrying out recovery or repossession activity through third-party until further notice. However, the company is allowed to carry out the activity through its own employees. RBI’s ban comes after certain material supervisory concerns observed in the company

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.

Earlier this week, a 27-year-old pregnant woman allegedly was crushed to death under a tractor which was forcibly driven away by the recovery agent of the said NBFC in the Hazaribagh district of Jharkhand. The victim was the daughter of a specially-abled farmer. The recovery agent refused to listen to the farmer’s plea and kept on driving the tractor, his pregnant daughter, who had reached the spot, ran after the vehicle and was crushed to death under its wheels. She was three-months pregnant. 

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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.” On BSE, Mahindra Finance shares closed at ₹223.75 apiece flat compared to the previous closing. The company’s market valuation is around ₹27,644.98 crore.


Mahindra Finance, a part of the Mahindra Group, is one of India’s leading non-banking finance companies. Focused on the rural and semi-urban sectors, the Company has over 8.1 million customers and has an AUM of over $11 Billion. The NBFC is a leading vehicle and tractor financier and provides loans to SMEs while also offering fixed deposits. The Company has 1,384 offices and reaches out to customers spread over 3,80,000 villages and 7,000 towns across the country.

Recently, RBI announced the guidelines on digital lending. The central bank has given regulated entities (RE) till November 30th to put in place adequate systems and processes to ensure that ‘existing digital loans’ comply with fresh lending guidelines. The new norms are applicable to both ‘existing customers availing fresh loans’ and to ‘new customers getting onboarded’.

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