M&M Financial shares fell 14% as RBI bars third-party services for loan recovery


New Delhi: The Reserve Bank of India (RBI) ordered Mahindra & Mahindra (M&M) Financial Services to immediately stop all recovery or re-possession attempts through outsourced funds until further orders. As a result, shares of M&M Financial Services fell 14% to Rs 192.05 on Friday.

The stock was down 11% at Rs 200 per share at 9:55 am, while the Nifty 50 index was down 0.78 per cent. Altogether 2 crore shares were traded on NSE and BSE.

“This action is based on certain material supervisory concerns observed in the said non-banking finance company (NBFC) with respect to the management of its outsourcing activities. However, NBFCs may continue to carry out recovery or forfeiture activities through their employees,” the RBI said.

According to the corporation, they retrieve 4,000 to 5,000 vehicles per month through both internal staff members and other organizations as part of their regular business operations. However, the company anticipates a reduction in this amount to between 3,000 and 4,000 per month as they immediately implement the RBI directive.

“The company has not outsourced any collection activities in its vehicle finance business to any third party agencies and, therefore, the company does not expect any impact on collections in this business,” the management said.

Given this, analysts at ICICI Securities believe that the RBI directive may have a short-term impact on the company’s recovery process and may have a negative impact on market confidence.

Despite Friday’s dramatic losses, M&M Financial outperformed the market over the past six months, gaining 25%. In contrast, the Nifty 50 index rose 1% in the same period. On September 15, 2022, the stock had earlier hit a 52-week high of Rs 235 per share.

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