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HomeNewsBusinessRBI, Sebi action will have a positive effect on financial services sector, says Mahindra's Anish Shah

RBI, Sebi action will have a positive effect on financial services sector, says Mahindra's Anish Shah

Several financial institutions, including IIFL Finance, Paytm Payments Bank, and JM Financial, have come under intense regulatory scrutiny, sparking concerns across the financial sector.

March 11, 2024 / 14:31 IST
Anish Shah, the Managing Director and CEO of the Mahindra Group

Recent regulatory actions by the Reserve Bank of India (RBI) and Securities and Exchanges Board of India (Sebi) on Paytm Payments Bank, IIFL Finance and JM Financial Ltd may have unsettled the markets, but Mahindra & Mahindra Ltd Group CEO and managing director, Anish Shah, believes that these actions by the central bank will benefit the financial services industry.

In an interview, Shah said that the group sees the recent RBI actions as positive for the financial services sector.

“The recent actions we look at have (having) a positive effect, and we look at that as consistent with what the standard has always been that our financial services business must be run well with the right set of controls around it with the right risk framework,” Shah said.

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Last week, RBI barred non-bank lender IIFL Finance from sanctioning and disbursing gold loans with immediate effect, citing certain material supervisory concerns. In the same week, the central bank barred JM Financial Products from any form of financing against shares and debentures after it discovered ‘serious deficiencies’ that could be detrimental to the interest of customers. On January 31, RBI virtually halted the operations of Paytm Payments Bank by imposing significant business restrictions, including a ban on accepting fresh deposits.

Justifying the regulatory crackdown, Shah said that one needs to have very strong processes, strong controls, and a strong risk framework. “RBI, in fact, has always been very disciplined in asking for that, and that’s the right thing to do,” Shah said. “Even if you take for a minute that there was no regulation in this industry, as the Mahindra Group, if we have a large entity that has risks attached to it, we would want to make sure those risks are contained and that that business operates with a tight set of controls.”

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Responding to a query on whether RBI’s actions can lead to some opportunities for the Mahindra group to cash in on, Shah said that the group will avoid lending to risky segments. “You could say in some form that there is. But if there is credit being given in the market at high risk, we are not going to go in and do the same,” he said.

On the group’s financial services business, Mahindra & Mahindra Financial Services Ltd, the group CEO said that the business has gone through a very significant transformation.

“If you look at the recent results, the concerns on volatility, on NPA have been solved. For us, credit costs were never an issue,” Shah said.

“The business has gone through a very significant transformation on the technology side. Many tech programmes have been launched as well, which have been doing very well. And we expect that in the next one and a half years, we should come out much, much stronger,” he added.
For the quarter ended December 31, the financial services business saw its loan book grow 25.5% year-over-year to Rs97,048 crore.

Gross Stage-3 non-performing assets stood at 4% of the loan book, down from 4.3% in the previous quarter. Gross stage 3 assets refer to loans that have been overdue for over 90 days.

Mahindra & Mahindra Financial Services is the largest financier for M&M’s vehicles. In terms of units, the company financed about 40% of M&M’s utility vehicle sales and 31% of the tractor sales as of FY23, according to credit rating agency India Ratings & Research.

Swaraj Singh Dhanjal
Deborshi Chaki
first published: Mar 11, 2024 08:18 am

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