Himani Chowdhary Instagram – 🚨 RBI’s Strict Warning to NBFCs ‼️
The Reserve Bank of India (RBI) has asked non-bank finance companies (NBFCs) to strictly adhere to a cap of Rs 20,000 in cash loans. This move is likely to deter cash transactions and follows action against IIFL Finance for violating several rules, including those on disbursal and collection of loans in cash in excess of the statutory limit.
The RBI’s directive comes after it found that some NBFCs were flouting the rule by asking customers to sign an “indemnity” for accepting liability against income-tax actions. This practice was putting customers at risk and could have led to a build-up of systemic risk.
The RBI’s move is likely to have a significant impact on the way NBFCs operate. It will make it more difficult for them to disburse large cash loans, which could lead to a slowdown in their business. However, it is also likely to improve the safety and soundness of the NBFC sector.
Imagine you borrow money from a lender. The lender gives you a loan of more than ₹20,000 in cash, even though there’s a rule saying they shouldn’t do that. To cover themselves, they make you sign a paper called an “indemnity.”
This indemnity basically says that if the tax authorities come after you because of this large cash transaction, you’re the one who will have to deal with it, not the lender. The lender is trying to shift all the responsibility and risk onto you.
This is a problem because it’s unfair to the borrower. They’re being forced to take on a risk that’s not really theirs. It’s also a problem for the whole financial system because if a lot of people are taking these risky loans, it could lead to a big mess if something goes wrong.
Muthoot Finance MD said that their 80% customers moved to non-cash channels and the RBI advisory applies to all gold lenders and therefore it’s not a challenge. However, Muthoot said some of the customers in rural regions may move to unorganised lenders
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Share this news with everyone and be aware 🙏 | Posted on 13/May/2024 16:30:10
