Reserve Bank of India focuses on Mahindra & Mahindra Financial Services Ltd Physical Repossession process

 

Reserve Bank of India focuses on Mahindra & Mahindra Financial Services Ltd Physical Repossession process

          The trigger for this blog post is Reserve Bank of India’s Press Release dt Sept22, 2022 @ https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=54414

          The title of the above press release is: Action against Mahindra & Mahindra Financial Services Ltd., under Section 45L(1)(b) of the Reserve Bank of India Act, 1934

          The press release gist is:

The Reserve Bank of India has today, in exercise of its powers under section 45L(1)(b) of the Reserve Bank of India Act, 1934, directed Mahindra & Mahindra Financial Services Ltd. (MMFSL), Mumbai, to immediately cease carrying out any recovery or repossession activity through outsourcing arrangements, till further orders.

At the same time, Reserve Bank of India made it clear that the said NBFC may continue to carry out recovery or repossession activities, through its own employees.

Reserve Bank of India action is based on certain material supervisory concerns observed by RBI in the said NBFC, with regard to the management of its outsourcing activities.

          My only wish is that ‘Mahindra & Mahindra Financial Services Ltd’ onboards BBPS with live connectivity to it’s borrower accounts.

          Q: What is meant by live connectivity?

          Ans: Live connectivity means the EMI’s due amount in the borrowers accounts in the company’s IT Systems should be picked up and displayed in the BBPS “pay Emi” field.  

          There are a number of tools available in the Indian market for recovery of overdue loans.

          My focus is only on BBPS as a tool to reassure borrowers of their overdue amount, and collection transparency.

          The borrowers should be able to see their pending EMIs amount in any BBPS enabled Application and be able to pay digitally or via Cash at any BBPS Collection Point.

          No physical cash should be collected by the finance company’s employees or agents towards EMI repayments.

           

 

Additional Reading:

RBI directs Mahindra Finance to stop outsourcing its recovery activity through agents @  https://www.livemint.com/companies/news/rbi-directs-mahindra-finance-to-stop-outsourcing-its-recovery-activity-through-agents-11663854933869.html

Pregnant woman crushed to death under tractor wheels by recovery agents, RBI bars Mahindra Finance from loan recovery through 3rd party agents @ https://zeenews.india.com/personal-finance/pregnant-woman-crushed-to-death-under-wheels-of-tractor-by-recovery-agents-rbi-bars-mahindra-finance-from-loan-recovery-through-3rd-party-agents-2513327.html

Mahindra Finance share price tanks 10% after RBI action - what investors should know @ https://www.zeebiz.com/market-news/news-mahindra-finance-share-price-tanks-10-following-rbi-action-what-investors-should-know-200254

Mahindra Finance says number of repossessed vehicles will go down after RBI order @  https://www.businesstoday.in/latest/corporate/story/mahindra-finance-expects-number-of-repossessed-vehicles-to-go-down-after-rbi-order-347997-2022-09-23

 

Why RBI Directed Mahindra & Mahindra Finance To Stop Recoveries Through Third-Party Agents @

https://www.outlookindia.com/business/why-rbi-directed-mahindra-mahindra-finance-to-stop-recoveries-through-third-party-agents-news-225324

 

 

 

 

 

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Disclaimer: These are my personal views only. The bottom line is Safe ePayments. Nothing More – Nothing Less.

The next eCommerce Frontier in India – Overdraft Finance for Shoppers

          The chief inspiration for today’s blog Post is the Star Trek Quote – “Space - Where no man has gone before"

          The eCommerce arena in India is witnessing an explosive growth with the pool of Online Shoppers increasing every minute.    

     

          This Forbes article reflects the trend.  

          One of the main reasons as to why shoppers still prefer mom and pop retail stores is the informal overdraft facility.

          Any reasonable sized mom and pop store offers overdraft facilities ranging from INR 250\-to INR5000\-.

          These overdraft facilities are offered without any security and are based on trust.

          The default levels of such overdraft are very low.

          Today’s post explores the market and the process flow for introducing Overdraft facility for online shoppers.

Q: What is an Ovedraft?

Ans:  Overdraft is an Loan arrangement under which a bank extends credit up to a maximum amount (called overdraft limit) against which the account holder can write checks or make withdrawals. An overdraft is a type of revolving loan where deposits (credits) are available for re-borrowing, and interest is charged only on the daily overdraft (debit) balance.

The most famous overdraft facility in India is the PMJDY Overdraft facility.

Q: How different is from EMI financing?

Sr No	Overdraft	EMI Loan
01)	This is like a revolving credit. There can be Debits (Withdrawals) and Deposits (Credits) in the account. Debits (Withdrawals) can be made upto the set limit.	Single Debits (Withdrawal), multiple credits
02)	Interest is charged on the daily withdrawal outstanding at the end of every month.	Interest is collected along with part of the Principal every month.
03)	Petty shopkeepers or Wholesale shopkeepers offer informal overdraft facilities. The interest portion is built into the selling price.	EMI Loans are offered by Banks or financial institutions.

Q) What are the finance options available to Online Shoppers in India?

Ans: The most common finance options in India to Online Shoppers are the EMI loans from the Credit Card Companies.

These EMI options are available only for the respective credit card holders only. New online shoppers cannot avail the EMI options.

Check out on this Google Search for more information on EMI Options.

No Finance Company in India offers Overdraft facilities, more so for online shoppers.

A couple of finance companies do offer EMI loans to online shoppers. Check out here for one such tie up between an eCommerce Company and a Finance Company.

This tie-up is a mix of online and offline model.

It is not a full fledged online model.

The following is a full-fledged model.

01) Customer profiles are created based on eKYC and allot unique customer codes.

02)                  Fix overdraft limits as per risk profile of the customers.

03)                  Obtain NACH (Debit) mandate for recovery of the monthly interest. The upper limit can be fixed as per the Overdraft Limit of the customer.

04)                  Tie up with eCommerce companies wherein the customers can interact with the finance company to finance his/her purchases till the eligible limit.

05)                  Raise alarm when the NACH(Debit) transaction is returned with any reason; financial or non-financial reason.

This Model is most suitable for Finance Companies, though Banks can also consider adopting it.

This model has the following benefits:-

a)    Increase the pool of new customers for eCommerce companies.

b)    Increase the pool of new customers for Finance companies.

c)    Encourage online customers to build a positive credit report.

d)    Encourage Digital India Transactions.

e)    Introduce advanced fraudulent detection techniques.  

f)    Introduce new earning streams for eCommerce/Logistics personnel.

g)    eCommerce companies need not invest for finance.

h)    The processing charges, if any, can be paid by the eCommerce companies if the purchases are beyond a specified level.

                   

Check out this Google search results for the various contours of ecommerce in India