Reserve Bank of India (RBI) has asked non-banking financial companies (NBFCs) not to pay more than Rs 20,000 in cash while giving loans against gold in line with income tax laws. In an advisory issued earlier this week to financiers and micro-finance institutions offering loans against gold, the Reserve Bank has asked them to comply with Section 269SS of the Income Tax Act. Section 269SS of the Income Tax Act provides that a person cannot accept deposits or loans made by any person other than through specified modes of payment.
Permissible limit of cash Rs 20,000
The approved limit of cash in this section is Rs 20,000. The advisory comes a few weeks after the central bank had barred IIFL Finance from sanctioning or disbursing gold loans after it noticed some concerns during its inspection. Commenting on this advice of the Reserve Bank, VP Nandakumar, Managing Director and Chief Executive Officer (CEO), Manappuram Finance, said that in this the limit of Rs 20,000 for giving cash loans has been reiterated.
Will help in bringing better compliance
He said half of Manappuram Finance’s loans are disbursed through online mode and even for loans received from branches, most customers prefer direct transfer. Indel Money CEO Umesh Mohanan said the directive will help in bringing transparency and better compliance but may have an impact as many people in rural areas are not part of the formal banking system. Mohanan said this directive may inadvertently hinder marginalized sections from accessing gold loans even in emergencies, thereby limiting financial access.
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