The Reserve Bank of India (RBI) has directed non-banking financial companies (NBFCs) to operate only as per income tax rules. According to Income Tax law, only cash up to Rs 20,000 can be given in exchange for gold.
Earlier this week, RBI had also advised small finance companies to follow Section 269SS of the Income Tax Act.
According to section 269SS any person can make payment through specified methods. If no other person can take the deposit or loan amount.
RBI directed that now only Rs 20,000 will be given as cash. Actually, the Central Bank noticed some problems during the inspection of IIFL Finance, after which the bank took this decision.
Commenting on the RBI decision, VP Nandakumar, MD and CEO of Manappuram Finance, said it has reiterated the Rs 20,000 limit for granting cash loans.
Indel Money CEO Umesh Mohanan said the recent RBI directive to ensure seamless transition in bank transfers is aimed at increasing compliance in the NBFC sector.
While this may bring transparency and better compliance, and is a step in the right direction towards the beginning of Digital India, it may slow down the adaptability of rural India, where many individuals are not part of the formal mainstream.
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