New Delhi: The Reserve Bank of India (RBI) ordered Mahindra & Mahindra (M&M) Financial Services to immediately stop all recovery or repossession efforts via an outsource until further orders. As a result, shares of M&M Financial Services fell 14% to Rs 192.05 on Friday.

The stock was down 11% at Rs 200 a share at 9:55 am, while the Nifty 50 index was down 0.78 percent. On the NSE and BSE, 20 million shares were traded in total.

“The action is based on certain material supervisory concerns observed in the said non-banking finance company (NBFC), with regard to the management of its outsourcing activities. However, the NBFC may continue to carry out recovery or repossession activities, through its own employees,” the RBI said.

According to the corporation, they reclaim 4,000 to 5,000 vehicles per month through both internal staff members and other organisations as part of their regular business operations. However, the company anticipates a brief decrease in this amount to between 3,000 and 4,000 per month as they immediately implement the RBI directive.

“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,” the management added.

Given this, analysts at ICICI Securities think that the RBI’s directive may have a short-term impact on the company’s recovery process and may negatively affect market confidence.

Despite Friday’s dramatic loss, M&M Financial outpaced the market over the previous six months, rising 25%. The Nifty 50 index, in contrast, increased 1% over the same time period. On September 15, 2022, the stock had previously reached a 52-week high of Rs 235 per share.