InvestorQ : Why has the RBI banned M&M Financial from using collection agents till further notice?
Tisha Malhotra made post

Why has the RBI banned M&M Financial from using collection agents till further notice?

Aashna Tripathi answered.
2 months ago

The ban came after a tragedy caused by an external recovery agents of M&M Financial Services. Now, it must be remembered that all banks and NBFCs employ professional collection agents to collect outstanding amounts on credit cards, personal loans, car loans etc. In this case, a young pregnant lady was overrun by the tractor as the recovery agent was driving away the tractor. The callousness of one of the recovery agents of M&M Financial Services compelled the RBI to act quite strongly.

This week, RBI instructed M&M Financial Services not to undertake any loan recovery or repossession activity through outsourcing agents or outsourcing arrangements, till further orders from the RBI. M&M Financial Services can continue its recovery or repossession activities, through its own employees. The 27 year old pregnant woman was the daughter of a differently-abled man who had been given a tractor loan. When he could not repay, the agent repossessed the tractor and drove it away, killing the young lady in the process.

The tractor loan was financed by M&M Financial Services. Firstly, it was violation of norms on recruitment of loan recovery agents. Secondly, it applies to strong arm tactics used. Most banks and NBFCs use external recovery agents to avoid getting into the mess. Even Anand Mahindra personally tweeted his apologies and an enquiry is underway. NBFCs are already under pressure dur to the RBI guidelines on recovery. Now things are going to get tougher. The shift is that, now the banks have to take accountability for the recovery agents too.