If you frequently withdraw money from banks, an important update from the Reserve Bank of India (RBI) has been announced. It is crucial for everyone to be aware of this new directive to avoid any inconvenience. Below, we provide a detailed breakdown of the latest RBI guidelines.
RBI Restricts Cash Loans Over ₹20,000
The Reserve Bank of India has issued stringent guidelines for Non-Banking Financial Companies (NBFCs). According to these directives, no NBFC is permitted to provide cash loans exceeding ₹20,000 to customers. This rule is in accordance with Section 269SS of the Income Tax Act, 1961, which restricts individuals from receiving cash loans above this threshold.
RBI’s Concerns Highlighted in Reuters Report
A recent Reuters report suggests that the RBI is reinforcing this rule to minimize financial risks and ensure strict compliance. These guidelines have been introduced at a critical time when several NBFCs have been found violating regulatory norms.
Notably, NBFC company IIFL Finance has been accused of multiple infractions. Reports indicate that some financial institutions issued and recovered loans exceeding the legally prescribed limit, prompting RBI’s intervention.
RBI’s Clear Instructions to NBFCs
The RBI has formally notified NBFCs, reiterating that cash loans exceeding ₹20,000 must not be disbursed under any circumstances. These measures aim to curb financial irregularities and ensure adherence to regulatory standards.
Why Has RBI Issued These Instructions?
In recent months, RBI has taken stringent action against several NBFCs for non-compliance with financial regulations. These companies overlooked essential guidelines, leading to excessive cash loan disbursements and subsequent legal violations.
By reinforcing these rules, RBI aims to eliminate negligence and ensure that all financial institutions comply strictly with existing regulations.
Action Against IIFL Finance
One significant case that prompted RBI’s intervention was IIFL Finance. The central bank instructed the company to halt its gold loan operations for new customers immediately due to severe mismanagement.
Gold loans constitute a substantial portion of IIFL Finance’s business, making up nearly one-third of its operations. However, the company was found violating key regulations, including inadequate gold purity verification, excessive cash loan disbursement, deviations from standard auction procedures, and a lack of transparency in customer charges.
This enforcement by RBI underscores the need for financial institutions to strictly adhere to regulatory guidelines, ensuring transparency and accountability in the sector.