NBFC cash loan against gold restricted to Rs 25,000

Non-Banking Finance Companies (NBFCs) cannot lend more than Rs 25,000 in cash against gold, the Reserve Bank said today.

The earlier provision for NBFC was that high value loans against gold of Rs 1 lakh and above must only be disbursed by cheque.

RBI reduced the amount to Rs 25,000 from the earlier Rs 1 lakh in line with the provisions of the Income Tax Act.

"...the relevant threshold under the Income Tax Act, 1961 is Rupees Twenty thousand," the central bank said, while amending the provisions for disbursal of loan amount in cash by NBFCs.

This assumes significance in the backdrop of government's focus on less cash economy and promoting digital payments.

The government has demonetised old Rs 500/1000 notes on November 9 last year aiming to check black money, counterfeit currency and terror financing.

The decision created severe cash crunch in the country in the last two months of 2016 as 86 per cent of the currency was declared invalid.

RBI had placed several restrictions on cash withdrawals from the bank branches and ATMs.

However, with increasing pace of remonetisation, all the restrictions, except on savings bank account, have been lifted. The cash withdrawal limit on savings bank account too will be removed from March 13.