You will No Longer get more than ₹20k Cash for Gold Loans at NBFCs! Know Why

Cash Limit Rule on Gold Loans sends Shockwaves through NBFCs
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The Reserve Bank of India ( RBI) threw a curveball at Non-Bank Financial Companies ( NBFCs ) recently by slapping a Rs 20,000/- limit on cash payouts for gold loans. Aimed at controlling cash flow in the lending market, this move from the Reserve Bank has set off a ripple of concern and debate among financial folks.

If you are looking for a loan against your gold jewelry, you will now get a maximum of Rs 20,000/- in cash. This RBI rule is a big change, especially for NBFCs who used to hand out bigger wads of cash for gold. The Rs 20,000 limit comes from the Income Tax Act and is meant to discourage people from dealing in too much cash. But here’s the catch — the rule does not apply to money deposited in your bank account. So, you can still get more than Rs 20,000, just not in cash.

This is a big headache for NBFCs whose business rely on giving out hefty amounts of cash against gold. They will have to adjust their plans and keep their profits up.

There are whispers that some NBFCs are not playing by the RBI rules and regulations. Apparently, a few are still offering more than Rs 20,000 in cash, making borrowers sign agreements that shift the tax burden onto them.

Unsurprisingly, the Reserve Bank of India has been cracking down on lenders who aren’t following the rules, like when the action was taken against IIFL. Visibly, RBI is committed to cleaning things up in the financial sector, in adherence with and leveraging the existing cash transaction limits under the Income Tax Act.

NBFCs now have to figure out how to give gold loans under these new cash disbursement limit restrictions.

While the cash limit might cause some problems in the short term, it could also push NBFCs to embrace technology, manage risk better, and follow the rules more closely. In the long run, this RBI move could be a turning point for NBFCs, making them more modern and transparent.

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