Even as financial institutions are in hefty action with regulations, the role of debt collection agent Appearing once again. This, after a reserve Bank of India (reserve Bank of India) order restriction Mahindra Finance By using third party recovery agents for recovery and possession of property after an unfortunate incident in Hazaribagh last week.
The move comes after reports that third party debt recovery agents working for M&M Finance allegedly rammed a 27-year-old woman with a tractor in Jharkhand’s Hazaribagh district, killing her. Local media reported that an argument broke out between the farmer, his daughter and the recovery agents.
Financial institutions outsource some part of their recovery and more importantly, possession of assets is passed on to third parties, especially in Tier B&C cities in India. It is not clear whether the RBI order benefits consumers from loan recovery harassment.
Debt recovery agents on their part state that they are only trying to recover or repossess within the targeted time-frame. An employee of Mumbai-based Badshah Recovery Agency said, “If we do not recover or take possession within the stipulated time, the contract goes to another agency. “Post-recovery commission comes from banks and non-bank lenders only after two months. Till then, we have to pay our collection team. Post-Covid, our business has come down, as many banks and NBFCs use their internal rely on resources,” he said. added. In a statement issued soon after the RBI order, Mahindra Finance said it has not outsourced any collection activities in its vehicle finance business to any third party agencies and, therefore, does not expect any impact on collections .
Ramesh Iyer, VC and MD, Mahindra Finance said, “We have a detailed policy in place for third party compliance with respect to possession of vehicles.” “In light of the recent tragic incident, we have stopped third party possession and will further investigate whether third party agents will be used in the future.”
While banks and NBFCs, post the pandemic, face increasing defaults on loans, such companies may increase the role of employees or internal resources in recovery and recovery, thereby gradually eliminating third party intervention, Experts said.
CEO of a large NBFC, asking anonymity, said, “We are modifying our policies based on RBI norms. We no longer employ any third party agents, as this is a sensitive issue for the regulator. ”
Shachindra Nath, VC and MD Ugro CapitalA recent television interview noted “We have stopped third party possession and will investigate whether third party agents will be used in the future.”
In another interview, Cholamadalam Finance said it has 1,500 external agents and staff accompany them for collection. He has another 13,000 in-house workers who focus on recovery. Shriram TransportAnother non-bank lender said all its recovery is being done in-house.
Mails sent by ET to these entities did not elicit any response till press time.