Mahindra & Mahindra Financial Services reports a 10% decline in profit

Mahindra even said that a fact-finding check of the scam in its Aizawl branch during the quarter identified 2,887 loan accounts as potentially deceitful.

Standalone Profit and Tax 

Mahindra & Mahindra Financial Services has reported a 10 percent decline in standalone profit and tax to Rs 619 crore for the January-March quarter of 2023-24.

Fraud Identification and Assessment 

During the quarter, the company conducted a fact-finding assessment of the fraud in its Aizawl branch, identifying 2,887 loan accounts as potentially fraudulent in nature. These loans had an outstanding net recoverable balance of Rs 135.9 crore as of March 31, 2024, which have been fully provided for.

Nature of Fraud 

The fraud in the Aizawl branch relates to retail vehicle loans disbursed by the company and involves extreme collusion between the company’s employees with segregated duties and external parties, including vehicle dealers and bank employees. It involved forgery of KYC and other asset-related documents, leading to the embezzlement of company funds.

Steps Taken 

Following the discovery of the fraud, Mahindra Finance appointed a law firm and an accounting firm to undertake a fact-finding assessment of the suspected irregularities. 

The company has also carried out an exhaustive analysis of customer contracts across the portfolio at an all-India level and confirmed no instances of similar fraud elsewhere.

Strengthening Controls 

As a proactive measure, Mahindra Finance has identified key initiatives to strengthen controls, including accelerating the timeline for centralization of document reviews and implementing digital due diligence tools for customer onboarding.

Financial Performance 

Despite the challenges posed by the fraud, Mahindra Finance posted a total income of Rs 3,706 crore during the March quarter of the 2023-24 fiscal, marking a 21 percent increase over the year-ago period’s Rs 3,057 crore.