RBI Has Asked Mahindra Finance To Stop Recovery Through Third Parties
The Reserve Bank of India (RBI) told Mahindra Finance on Thursday to stop loan recovery and repossession action through third-party agencies immediately.
The regulatory action follows an incident in Hazaribagh, Jharkhand, where a non-banking financial company (NBFC) recovery worker allegedly drove over a pregnant woman while confiscating her family’s tractor.
The NBFC has been permitted to pursue recovery or repossession operations through its staff. According to the central bank, the action is based on “significant supervisory concerns” detected in the company about managing its outsourced activities.
Mahindra & Mahindra Financial Services Ltd. (MMFSL), Mumbai, has been ordered to stop immediately engaging in any recovery or repossession activity through outsourcing arrangements, the regulator stated in a release, as part of its authority under section 45L (1)(b) of the Reserve Bank of India Act, 1934.
The RBI has a policy that states lenders must not employ excessive harassment, continuously bother borrowers at unusual hours, or use muscular power to collect loans. The regulator’s fair practices regulation specifically indicates that customer complaints include disrespectful behavior by company employees. As a result, NBFCs must guarantee that their employees are properly trained to interact with consumers.
How To Protect Yourself From Loan Apps In India?
Despite that, the incidence of harassment and abuse for recovery of loans, many of them given by digital lenders, rose significantly in the wake of the Covid outbreak.
Following increased complaints, RBI 2020 issued a circular telling all lenders regulated by it to list the names of their digital app partners on their website. One of the regulator’s guidelines for digital lending, issued on August 10 this year, is to check the rampant engagement of third parties by regulated entities.
In its report, the working group on digital lending recommended laying down a code of conduct for recovery agents and putting the names of the erring members on a negative or grey list for the sector by self-regulatory organizations after following the appropriate procedure.
In its report, the working group on digital lending recommended that self-regulatory organizations establish a code of conduct for recovery agents and place the identities of erring members on a negative or grey list for the sector after following suitable procedures.