Mahindra & Mahindra Financial Services Ltd (M&M Finance) has said it expects repossession of vehicles to “temporarily” fall by about 3,000-4,000 per month as it implements the Reserve Bank of India’s directive to stop outsourcing of such activities.
The company said it repossesses about 4,000-5,000 vehicles each month using third-party agencies and its own employees, in the normal course of business.
On the other hand, collection activities are not expected to be impacted as the company has not outsourced any collection activities in its vehicle finance business to third-party agencies, it said in an exchange filing.
“We have a detailed policy in place for compliance of third parties, with regard to repossession of vehicles,” said Ramesh Iyer, Vice-Chairman and MD of Mahindra Finance.
“In light of the recent tragic incident, we have stopped third-party repossessions and will further examine whether and how third-party agents will be used in the future,” he said in a statement.
Repossession activities
RBI, on Thursday, barred M&M Finance from outsourcing any recovery or repossession activities, while allowing the company to continue such activities through its own employees. The directive followed an incident where a 27-year-old pregnant woman was allegedly killed by a tractor being driven by a recovery agent acting on behalf of M&M Finance.
Shares of M&M Finance tanked over 14 per cent today to touch an intraday low of Rs 192.05 so far. At 1222 IST, the stock was trading 11.4 per cent lower at Rs 198.20 on the National Stock Exchange.
M&M Finance today said the vehicles that are repossessed are mostly classified under Stage 3 assets, wherein the count of contracts stood at 1.35 lakh at the end of June. The company carries sufficient provisions of 58 per cent on these assets, including 100 per cent provision on contracts, which have an age of over 18 months.
“Therefore, this temporary halt to repossession activity using third-party agencies is not expected to have any material impact either on the financials or on Net Stage 3,” it said.
Mahindra Finance’s gross stage 3 assets ratio was at 8.0 per cent as of June 30, against which the company held a provision cover of 58 per cent, and additional management overlay provisions of Rs 1,060 crore.