Shares of Mahindra and Mahindra Financial Services on Friday fell more than 14 per cent after the Reserve Bank of India (RBI) directed the company to stop using third-party services for loan recovery until further orders.
The company's shares tumbled as much as 14.17 per cent to hit an intraday low of Rs 192.05, their biggest intra-day percentage slide in 17 months.
As of 10:35 am, the stock was trading 11.46 per cent lower at Rs 198.10.
The Reserve Bank, late on Thursday, asked Mahindra Finance to stop using third-party services for recoveries until further orders. However, the company may continue to carry out recovery activities through its employees, the central bank said.
The RBI action comes just days after a pregnant woman was crushed to death under the wheels of a tractor being forcibly taken away by recovery agents in the Hazaribagh district of Jharkhand.
In response to the RBI's direction, Mahindra Finance today said its monthly vehicle recovery would temporarily fall as the central bank told it to stop using third-party services for repossessions.
The company said it "expects the number of repossessed vehicles to temporarily go down by about 3,000 to 4,000 vehicles per month, from the 4,000 to 5,000 it repossesses in the normal course of business."
Mahindra Finance also stated that the halt on vehicle recovery by third-party agencies "is not expected to have any material impact" on its financials.
"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 the collections in this business," it added.
Meanwhile, shares of Mahindra & Mahindra (M&M) were down 3.08 per cent to trade at Rs 1,270.05 in late morning deals today. Mahindra Finance is the financial services arm of M&M.
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