Shares of Mahindra & Mahindra Financial Services rose nearly 3% in opening trade on Thursday after the Reserve Bank of India (RBI) lifted restrictions on loan recovery through third-party agents with immediate effect. In September last year, the central bank had imposed a ban on the company to carry out any recovery or repossession activity through outsourcing arrangements.

“Based on the submissions made by the company and its commitment to strengthen its recovery practices and outsourcing arrangements, tighten the process of onboarding third party agents and strengthen accountability framework as per its Board approved action plan, the RBI, vide its letter dated January 4, 2023, has informed the company of its decision to lift the aforementioned restrictions imposed on the company with immediate effect,” M&M Financial Services said in a BSE filing on January 4.

Following the announcement, shares of M&M Financial Services opened 1.5% higher at ₹237.35 against the previous closing price of ₹234.15 on the BSE. The stock gained as much as 2.75% to ₹240.6 in the first hour of trade so far, while the market capitalisation climbed to ₹29,381 crore. In comparison, the BSE Sensex was trading 88 points lower at 60,569 levels.

The RBI had barred the non-banking finance company for carrying out loan recovery through outsourcing on September 22, 2022. The action was taken based on certain material supervisory concerns observed in the company, with regard to the management of its outsourcing activities.

The action was taken days after a pregnant woman was crushed to death under the wheels of a tractor, owned by her father, was forcibly taken away by recovery agents affiliated to Mahindra Finance in the Hazaribagh district of Jharkhand. The local police had filed a murder case against the loan recovery agent and a manager of the private lender, which has the biggest market share in tractor financing.

As per an agency report, the farmer had borrowed ₹1.3 lakh from Mahindra Finance to buy a tractor and since he had defaulted, his tractor was seized. The loan recovery agent was allegedly driving away with the tractor parked at a petrol pump, prompting the farmer to run after the vehicle. During the melee, the farmer's 27-year-old daughter, who tried to intervene, came under the tractor's wheels.

In a separate development, the company informed that its board of directors will meet on February 3, 2023, to consider and approve the unaudited standalone and consolidated financial results for the third quarter and nine months ended December 31, 2022. For the second quarter ended September 30, 2022, M&M Financial Services reported 55% decline in its net profit at ₹492 crore compared with ₹1,103 crore in the year ago period. Total income increased 3% to ₹3,029 crore during the quarter under review against ₹2,951 crore during the corresponding quarter last year. 

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.