"This action is based on certain material supervisory concerns observed in the said NBFC, with regard to the management of its outsourcing activities," RBI statement said.

The RBI action came after MMFSL's loan recovery agents reportedly mowed down a pregnant borrower during a tractor repossession in Hazaribagh, Jharkhand.

MMFSL clarified to the bourses today (23 September) that tn the normal course of its business, the company repossesses about 4000 to 5000 vehicles per month, using the third-party agencies and its own employees. The company expects this number to go down temporarily by about 3000 to 4000 per month, as the company implements the RBI order with immediate effect.

The company said that it 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.

As on 30th June 2022, the count of contracts under Stage 3 was 1.35 lakh and the company carried a sufficient provision of 58% on these assets (inclusive of 100% provision on contracts with age of 18+ months). The vehicles that are repossessed are mostly classified under Stage 3 and therefore, this temporary halt to repossession activity using the third-party agencies is not expected to have any material impact either on the financials or on Net Stage 3.

MMFSL, part of the Mahindra Group, is a non-banking finance company. The NBFC reported a consolidated net profit of Rs 239.86 crore in Q1 FY23 as against a net loss of Rs 1,573.40 crore posted in Q1 FY22. Total income rose 13.5% year on year to Rs 2,913.96 crore in Q1 June 2022.