BENGALURU, Jan 4 (Reuters) - Mahindra and Mahindra Financial Services said on Wednesday the Reserve Bank of India lifted curbs placed on the company last year that prevented it from using third-party services for loan recovery.

The RBI's decision follows the company's pledge to strengthen its recovery practices, outsourcing arrangements and the process of onboarding third-party agents, the vehicle financing arm of the Mahindra group said in a regulatory filing.

Last year September, the RBI placed restrictions on the non-bank lender after a 27-year-old pregnant woman was crushed to death trying to stop a loan recovery agent, working on behalf of MMFS, from seizing her father's tractor over loan dues.

MMFS shares had plunged over 20% following the order in September, but better-than-expected quarterly results and improved asset quality helped it recoup the losses by December.

"We were expecting the lifting of restrictions only by March, so this is a positive move ahead of the fourth quarter, which is normally a very strong quarter in terms of collections," said an analyst who did not want to be named.

MMFS forecast in September the number of repossessed vehicles will temporarily go down by about 3,000 to 4,000 vehicles per month, from 4,000 to 5,000 it typically repossessed in the normal course of business.

The company's executives said in November there were no major gaps in their process of repossession using external agencies and that the impact from the RBI's order was likely to be minimal as collections and customer incomes were good. (Reporting by Chris Thomas in Bengaluru; Editing by Dhanya Ann Thoppil and Shinjini Ganguli)