India’s Mahindra lending arm sees vehicle recovery slip 75% on RBI order

People walk past a screen displaying the Mahindra and Mahindra logo before the start of a news conference in Mumbai, India May 30, 2016. REUTERS/Danish Siddiqui

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BENGALURU, Sept 23 (Reuters) – India’s Mahindra and Mahindra Financial Services (MMFSL) (MMFS.NS) said on Friday the monthly recovery of its vehicles would temporarily drop by around 75%, a day after the central bank of the country ordered the company to stop using third-party services for repossessions.

The company’s shares fell 10% to 201.35 rupees at 0414 GMT, their biggest intraday percentage drop in 17 months.

The Reserve Bank of India on Thursday evening ordered the company to stop using third-party services for collections until further notice, citing “significant oversight concerns”. Read more

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Recent media reports said a 27-year-old pregnant woman was crushed to death trying to stop a loan collector, working on behalf of MMFSL, from seizing her father’s tractor due to loan debt.

MMFSL said Friday it expects the number of repossessed vehicles to temporarily decrease by about 3,000 to 4,000 vehicles per month, from the 4,000 to 5,000 it repossesses in the normal course of business, which implies a decline of more than 75% at mid-term. point of these ranges.

The end of vehicle recovery by third-party agencies is not expected to have a significant impact on its finances, the company said.

“The Company has not outsourced any collection activities in its vehicle finance business to third-party agencies and therefore the Company does not expect any impact on collections from this business,” she said. in a press release.

A spokesperson for the company declined to elaborate further, instead directing questions to a statement from MMFSL vice president and general manager Ramesh Iyer.

“In light of the recent tragic incident, we have halted third-party repossessions and will further investigate whether and how third-party agents will be used in the future,” Iyer said in a statement Thursday.

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Reporting by Navamya Ganesh Acharya and Nivedita Bhattacharjee in Bengaluru; Editing by Savio D’Souza

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