RBI asks NBFCs not to lend
more than Rs. 20,000 in cash for gold loan
The
Reserve Bank of India (RBI) has cautioned the non-banking finance companies
(NBFCs) extending gold loans against breaching the Rs 20,000 cap on cash loan
disbursal.
While
issuing the advisory, the central bank referred to the provisions of the
Section 269SS of Income Tax Act, 1961, that stipulates no individual can
receive more than Rs. 20,000 as loan amount in cash.
Gold
loan NBFCs have been advised to strictly adhere to the provisions of the IT
Act, the regulator said in a communication which has been reviewed by Business
Standard.
In
March, the RBI had barred IIFL Finance, a non-banking financial company, from
sanctioning and disbursing fresh gold loans following material supervisory
concerns and to protect the interests of customers.
One
of the concerns was related to higher cash disbursement than what the norms
stipulate.
The
IIFL management, however, conveyed that majority of the concerns are
operational in nature, and not an outcome of any unethical practices by the
company.
The
NBFC's gold loan asset under management was around Rs. 24,700 crore which was
about 31 per cent of its total asset under management. IIFL Finance operates
over 2,721 dedicated gold loan branches across 25 states/UTs, staffed by
approximately 15,000 employees.
NBFCs
remain the dominant provider of gold loans although their growth trailed that
of banks. According to RBI data, the share of gold loan in the total loan of
NBFCs was 59.7 per cent in 2022-23, marginally down from 61.7 per cent in the
previous financial year.
NBFCs
are required to maintain a Loan-to-Value (LTV) ratio not exceeding 75 per cent
for loans granted against the collateral of gold jewellery.
An
email sent to RBI to seek comments on the issue remained unanswered till the
time of going to the press.
www.business-standard.com
dt. 09.05.2024