The Reserve Bank of India has barred Mahindra & Mahindra Financial Services (M&M Financial) from carrying out any recovery or repossession activity through outsourcing arrangements, till further notice.

“However, the said NBFC may continue to carry out recovery or repossession activities through its own employees,” the central bank said in a release on Thursday. The central bank added that the directive is based on certain “material supervisory concerns observed” in M&M Financial with regard to the management of its outsourcing activities.

The regulatory action comes following reports of a 27-year-old pregnant woman being allegedly crushed to death on September 15 in Jharkhand, by a tractor being driven by a recovery agent acting on behalf of M&M Finance.

Recovery incident

News agency PTI reported that the 27-year-old woman was trying to stop the loan recovery agent from seizing her differently-abled father’s tractor–financed by M&M Finance–over unpaid dues to the extent of ₹1.2 lakh.

Mahindra Group later confirmed the incident with Mahindra Group Chairperson Anand Mahindra calling it a “terrible tragedy”.

Anish Shah, MD and CEO of Mahindra Group, said the company will “investigate this incident from all aspects and will also undertake an examination of the practice of using third-party collection agencies that has been in existence”.

M&M Finance refused to comment on the RBI directive, when contacted.

RBI norms

The RBI defines ‘outsourcing’ as an NBFC’s use of a third party (either an affiliated entity within a corporate group or an entity that is external to the corporate group) to perform activities on a continuing basis that would normally be undertaken by the NBFC itself.

As per 2017 regulatory guidelines, outsourcing of any activity by an NBFC does not diminish the lender’s obligations, and those of its Board and senior management.


NBFCs are, therefore, responsible for the actions of their service provider including direct sales, marketing and recovery agents, as NBFCs shall retain ultimate control of the outsourced activity, the central bank had then said.

However, third-party recovery agents continue to be outside the RBI’s direct purview. This has led to some lenders adopting aggressive agreements with agents, resulting in several complaints of harassment and unruly behaviour by agents towards borrowers.

On August 12, the RBI barred recovery agents from intimidating borrowers as well as calling them before 8 am and after 7 pm.