We have a sobering but important story for you today. When we last wrote about the ways and methods of collection agents, at the start of the pandemic, the central bank's moratorium on loans had just ended. It saw anxious lenders eager for repayment, and an army of overzealous collection agents at work. The effects of the pandemic are still being felt. And collection agents are still running wild. In September, four of Mahindra Finance’s third-party recovery agents landed at a 22-year-old pregnant woman's house to repossess her father’s tractor. He had bought it in 2018 through the non-banking financial company (NBFC). But during the second Covid-19 lockdown, he missed six equated monthly installments. The total amount due was Rs 1.2 lakh (~$1,500), and he was just Rs 10,000 (~$120) short. In an attempt to stop the agents from taking away the tractor, the woman came under its wheels and died the same day. The tractor now stands in front of her house as an eerie reminder. Mahindra Finance, one of India's largest non-banks, decided not to repossess it, after all. The Reserve Bank of India has banned the NBFC from using third-party collection agents. The incident has got to hurt Mahindra Finance in multiple ways. For one, the ban is coming in what is its busiest season to recover loans. As it is, the NBFC is still reeling from the effects of the lockdown as it sees higher bad loans than its rivals. To make things worse, this incident can also scare away prospective borrowers. As Mahindra Finance tries to restore order, convince the central bank that this was an aberration, and change its ways of collection, the rest of the NBFCs are uncomfortably watching things unfold. It could have been just about any of them, looks at the kind of hole Mahindra Finance is finding itself in, and what it is doing to climb out of it.
