Breaking News
1. Massive fire at Varanasi railway station parking, over 200 vehicles gutted      2. First Sambhal, Then Ajmer: Ex-CJI Chandrachud Under Fire For ‘Opening Floodgates’ Of Survey Pleas      3. Chennai Airport Shut, Trains Hit As Cyclone Fengal Intensifies      4. 2nd Hindu Priest Arrested In Bangladesh Amid Protests: ISKCON Member      5. Man climbs mobile tower in Kota, threatens suicide over his tractor seizure      6. Body of 2-year-old, his grandmother recovered from river in Manipur      7. Bodies of six abducted in Jiribam found; Kerala CM and UDF leaders argue over BJP defection      8. Several flights, trains disrupted as Delhi covered in smog, visibility down      9. Delhi air quality: AQI at this Delhi station above 1500      10. Pawan Kalyan condemns deaths of 2 Hindu girls in Pakistan who faced ‘atrocities’      11. India not to travel to Pakistan for Champions Trophy, wants its matches in Dubai      12. India not to travel to Pakistan for Champions Trophy, wants its matches in Dubai      13. Samosas, cakes meant for Himachal Pradesh CM Sukhu served to his security staff instead; CID probe on      14. We remain undeterred: Australian outlet on Canada's ban after Jaishankar presser      15. 'We Are Here Only As Pilgrims, Do Our Work & Leave': CJI DY Chandrachud Bids Farewell To Supreme Court      16. PM Narendra Modi slams NC-Cong's Article 370 resolution: 'Conspiracy against Kashmir'      17. IPL Auction: James Anderson registers for first time      18. Sharda Sinha dies: Huma Qureshi, Manoj Bajpayee, and others grieve singer's death      19. Man shot in gang war outside Raipur jail, sparks outrage over security lapses      20. After MK Stalin, Udhayanidhi warns Vijay, TVK: Only DMK will win in 2026     

RBI further restricts cash dispensation for gold loan portfolios

  • Posted on June 13, 2024
  • News
  • By Arijit Dutta
  • 169 Views

The RBI is cracking down on NBFCs giving over Rs 20,000 cash for gold loans, citing tax rules. It reinforces regulatory compliance in a rapidly growing gold loan market.

1718272105-c3Rl3XjO9X.png

The Indian central bank, the Reserve Bank of India (RBI), has recently started tightening its rules on cash disbursements for gold loans from NBFCs. Later on, NBFCs involved in gold lending received a warning from the central bank on May 8th to follow the income tax laws that regulate that no more than Rs 20,000 can be paid in cash for any loan.

This is after the RBI in March placed restrictions on the gold loan business of IIFL Finance for the violation of set rules and regulation on issues such as cash disbursal. The regulator also relied on Section 269SS of the Income Tax Act which prohibits any person from receiving cash of more than Rs 20,000 in any form.

“RBI is clamping down on gold loans because of concerns on valuation of gold ornaments, auction mechanisms, KYC standards, AML requirements and other regulatory standards expected from NBFCs,” noted Vivek Iyer, Partner at Grant Thornton Bharat. He encouraged the customers to provide proper KYC documentations to enable them to recover pledged gold once loans are cleared.

The RBI has restricted the maximum loan to value ratio in gold loans up to 75% of the value of the pledged gold as against the jewelry. Adhil Shetty of BankBazaar. com said, “They can pledge gold of Rs 2 lakh but the maximum amount that can be paid out is Rs 20,000 due to the income tax laws. ”

While Indian households possess over 30000 tonnes of gold and only 7% has been pledged so far, the market for gold loans is considered to have a huge scope for expansion. This has probably led to increased RBI scrutiny to enforce the set regulatory measures.

Also Read: RBI intends to replace OTPs with new technology to curb digital frauds | Details inside

Banks sometimes lose out to NBFCs in gold loans due to higher valuations and a simpler procedure. However, borrowers are encouraged to look for the most convenient rates, costs, and procedures and avoid dealing with unlicensed payday loan lenders.

Author
No Image
Author
Arijit Dutta

You May Also Like