Mahindra Finance Fraud At Mizoram Branch Impacted Q4 Profit By Rs 135.86 Crore

The financial fraud at one of Mahindra & Mahindra Financial Services Ltd.'s Northeastern branches had an impact on the profit for the quarter and year ended March 31, 2024, amounting to Rs 135.86 crore.

The actual amount involved in the fraud stood at Rs 135.86 crore, the company said in an exchange filing on Saturday. "Company expects recovery of certain amounts upon completion of actions by law enforcement authorities."

On April 23, M&M Financial discovered a financial fraud involving retail vehicle loans worth Rs 150 crore. The fraud involved the forged KYC documents, which resulted in the embezzlement of company funds. Because of the fraud, the company had to delay its Q4 results.

NDTV Profit previously reported that the fraud happened in Aizawl, Mizoram branch of M&M Financial. An FIR was filed with Mizoram police on March 20, and an area manager and two business executives from the direct marketing vertical were also arrested.

In its Q4 press release, Mahindra Finance said that the financial fraud was a case of extreme collusion between employees and external parties, including vehicle dealers and bank employees.

To assess the irregularities, the company appointed a law firm and an accounting firm for fact-finding and assessment. As a result, it identified 2,887 loan accounts as potentially fraudulent in nature.

These loans also had an outstanding net recoverable balance of Rs 135.9 crore as of March 31, 2024, which has been fully provided for. 

As a result of the fraud, the company also made a one-time provision of Rs 136 crore in its Q4 results.

Further, it carried out an exhaustive analysis of customer contracts across its branches pan-India.

Accordingly, it did not find any more instances of similar frauds elsewhere. However, it has deployed a restoration team to stabilise operations at the affected branch.

"The company has also identified a few initiatives to further strengthen controls around document reviews and due diligence during customer onboarding," it added.