RBI On Gold Loan: Experts fear that people living in rural areas who are not connected to banking services may have to suffer the consequences.
RBI On Gold Loan: Banking sector regulator Reserve Bank of India has asked Non-Banking Finance Corporations (NBFCs) not to pay more than Rs 20,000 in cash while giving loan against gold. The Reserve Bank has asked the financial institutions and micro finance institutions giving loans against gold to follow the income tax rules.
Earlier this week, RBI has asked NBFC companies not to pay more than Rs 20,000 in cash as per income tax rules while giving loan against gold. In its advisory, RBI has asked these financial institutions to follow Section 269SS of the Income Tax Act. There is a provision in this Income Tax Act that the approved limit of cash for any person is Rs 20,000.
RBI had recently expressed some concerns during the inspection of IIFL Finance, after which the company was banned from approving gold loans or issuing loans. On this advice of the Reserve Bank, MD and CEO of Manappuram Finance VP Nandakumar said that the limit of Rs 20,000 for giving cash loans has been reiterated.
He said that 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 prevent marginalized sections from accessing gold loans even in emergencies, thereby limiting financial access.
