Mahindra Finance detects Rs 150 cr loan fraud: What we know so far

In respect of retail vehicle loans disbursed by Mahindra Finance, the fraud involved forgery of KYC documents leading to embezzlement of company funds

Mahindra Finance on Tuesday said it had in March detected about Rs 150 crore fraud in its loan portfolio at one of its branches and has postponed the finalisation of results for the fourth quarter and also for the financial year until May 30.

What is the fraud about?

Amount involved: The estimated impact of the fraud is around Rs 150 crore (approximately $18.1 million).

Location: The fraud occurred at one of Mahindra Finance's branches in the northeast region of India.

Type of fraud: The fraud involved forgery of KYC (Know Your Customer) documents related to retail vehicle loans. KYC documents are used to verify the identity and financial status of loan applicants.

This suggests that fake identities or manipulated documents might have been used to obtain loans for vehicle purchases.

Impact: The company has postponed its board meeting to review and approve the financial results for the 2023-24 fiscal year due to this fraud. They are also taking corrective actions, which might include legal actions against those involved.

What the company said:

"In respect of retail vehicle loans disbursed by the company, the fraud involved forgery of KYC documents leading to embezzlement of company funds. The investigations into the matter are at an advanced stage. The company estimates that the financial impact of this fraud is unlikely to exceed Rs 150 crore," Mahindra Finance said.

Investigations are underway, and necessary corrective actions have been identified and are at various stages of implementation, including the arrest of a few persons involved, it added.

Board meeting deferred

In a move to address the unfolding crisis, Mahindra & Mahindra Financial Services postponed its scheduled board meeting, originally slated for April 23. The meeting, which was intended to review the financial results for the quarter ended March 2024, will now convene at a later date, to be communicated in due course.

The board meeting to consider financial statements, results and dividend for the period ended March 2024 is rescheduled and will be held on May 30, 2024.