 "Action against M&M Financial Services won't affect other NBFCs: RBI")
The Reserve Bank of India (RBI) on Friday said the action taken against Mahindra & Mahindra Financial Services (MMFSL) will not have an impact on other non-banking finance companies (NBFCs) as the action taken was against a specific entity.
Last week, the regulator directed MMFSL not to outsource recovery activity after a 22-year-old pregnant woman died in Jharkhand’s Hazaribagh while trying to block loan recovery agents from taking away her father’s tractor. She was crushed under the vehicle. The loan was taken from MMFSL.
“We don’t see any impact on other NBFCs because this specific restriction was related to one entity. We have not stopped or restricted outsourcing activities,” said MK Jain, Deputy Governor, RBI.
“We have issued various guidelines on outsourcing activities and fair practices code. We expect the regulated entities to come out with their board-approved policies and have more oversight and monitoring around outsourcing. We expect them to be on the right side of the law,” Jain said in the post monetary policy press conference on Friday.
Industry experts had pointed out that in light of these directions passed against one entity, the recovery activities of the NBFC sector could get impacted as a majority of NBFCs rely on outsourced agents for loan recovery.
“We had issued a circular on outsourcing of financial services and the responsibilities of the recovery agents in August and that is fairly comprehensive. Prior to that, when we issued the master direction on microfinance institutions, the responsibilities of the recovery agents have been clearly specified. Both these instructions would get integrated and we are coming out with a master direction on guidelines for outsourcing and conduct by the recovery agents,” said M Rajeshwar Rao, Deputy Governor, RBI.
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