New Delhi: The Reserve Bank has asked NBFC firms not to disburse cash component in excess of Rs 20,000 on loans against gold in line with the Income Tax laws.
In an advisory issued to gold loan financiers and microfinance entities earlier this week, the Reserve Bank of India has advised them to follow Section 269SS of the Income Tax Act.
Section 269SS of the Income Tax Act stipulated that an individual cannot accept a deposit or loan made by another person other than in the specified modes of payment. Under the section, the permissible cash limit is Rs 20,000.
The advisory comes weeks after the Reserve Bank barred IIFL Finance from sanctioning or disbursing gold loans after certain material supervisory concerns were observed in its gold loan portfolio.
During the inspection, the RBI found “serious deviations” in the assaying and certification of gold used as collateral for loans and during auctions upon default.
Commenting on the advisory, Manappuram Finance MD and CEO VP Nandakumar said it has reiterated the limit of Rs 20,000 for disbursing cash loans.
“Our highly popular product -- Online Gold Loan that forms 50 per cent of our gold loan book, follows a fully paperless process of application and disbursement,” he said.
Even for the loans originating at branches, most customers prefer direct transfers, he added.