May 29, 2024 04:39 (IST)
Follow us:
facebook-white sharing button
twitter-white sharing button
instagram-white sharing button
youtube-white sharing button
Rajkot fire: Gaming zone co-owner among those killed, police confirms today | Eyeing more seats in Bengal, PM Modi holds mega roadshow in north Kolkata | 'I am not against minorities but won't divide the country based on religion': PM Modi | Delhi LG VK Saxena takes swipe at Kejriwal over children's hospital fire, orders anti-corruption probe | Punjab minister Balkar Singh's obscene video surfaces, BJP calls AAP 'Anti Aurat Party'
RBI asks NBFCs to disburse cash loans only up to Rs 20,000: Report
Image Credit: Pixabay

RBI asks NBFCs to disburse cash loans only up to Rs 20,000: Report

| @indiablooms | 08 May 2024, 08:46 pm

Mumbai: The Reserve Bank of India (RBI) cautioned non-bank finance companies (NBFC) on Wednesday, advising them against providing cash loans exceeding the permitted threshold of Rs 20,000 ($240), media reported.

This action is expected to largely curtail cash disbursements to people borrowing against gold, reported Reuters.

The advisory from the central bank follows recent regulatory measures taken against IIFL Finance, the country's second-largest gold loan provider, for breaches related to cash disbursement and other regulations, said the report.

Retail credit in India has seen a rapid surge, notably with gold loans witnessing a threefold increase over the past four years.

According to at least a dozen sources speaking to Reuters, a significant portion of these gold loans is being disbursed in cash.

India prohibits lenders from providing cash loans exceeding 20,000 rupees to customers, in line with income tax regulations.

Despite this, non-bank finance companies (NBFCs) have been disregarding this rule, issuing substantial cash loans while having customers sign an 'indemnity' to accept liability against potential income tax repercussions, as per Reuters sources.

This has prompted the Reserve Bank of India (RBI) to take a close look of non-compliant lenders, aiming to safeguard customer interests and prevent the accumulation of systemic risk, one of the sources told Reuters.

RBI in its letter reiterated the rule on Wednesday.

"Please refer to provisions of Section 269SS of Income Tax Act, 1961, which stipulates that no individual can receive more than 20,000 rupees as loan amount in cash," the central bank said.

"Consequently, no NBFC should disburse loan amount in excess of 20,000 rupees in cash."

The report citing sources said that non-bank lenders that give out loans against gold "have been facing intense competition from smaller players", pushing them to take "excessive risks like going above the cash disbursement limit", a source aware of the central bank's thinking said.

Support Our Journalism

We cannot do without you.. your contribution supports unbiased journalism

IBNS is not driven by any ism- not wokeism, not racism, not skewed secularism, not hyper right-wing or left liberal ideals, nor by any hardline religious beliefs or hyper nationalism. We want to serve you good old objective news, as they are. We do not judge or preach. We let people decide for themselves. We only try to present factual and well-sourced news.

Support objective journalism for a small contribution.