In a recent move, the Reserve Bank of India (RBI) has restricted non-banking finance companies (NBFCs) to issue not more than Rs 20,000 in cash against gold loans, as per reports. This move is cited as a way to encourage people to go digital, something which is being popularised by the Indian government post its demonetisation drive, as per reports.
According to reports, the RBI noted that - the requirements under the Income Tax Act, 1961, as amended from time to time, would be applicable to all NBFCs with immediate effect. Currently, the relevant threshold under the Income Tax Act, 1961 is Rs 20,000.
The RBI directive saw the shares of Manappuram Finance and Muthoot Finance slip 4 percent on the bourses, as per reports. According to Muthoot Fincorp, reports say, lowering the limit from the limit of Rs 1 lakh for cash disbursement to now Rs 20,000 will cause an impact, as gold loan is cited as ready, on-the-spot money sought in tough times like emergencies of medical reasons etc. A large part of its base of consumers seeking loan for gold require loans of Rs.25,000 to 30,0000 and the new directive will require them to go digital. Although the NBFC currently pays through cheque or transfers money for amounts above Rs.1 lakh, now, the small amount loans which would value 25,000 to 30,000 would now have to be paid through digital means for values above Rs.20,000, reports add.