India's Central Bank Caps Cash Loans for NBFCs to Combat Illicit Transactions

Caps Cash Limit: India's central bank is taking decisive steps to curb cash transactions in lending sector. In a bid to enforce compliance with financial regulations, non-bank finance companies (NBFCs) are now subject to a strict cash loan cap of 20,000 rupees ($240). This directive, outlined in a letter seen by Reuters and confirmed by informed sources, aligns with Section 269SS of Income Tax Act, 1961, which prohibits individuals from receiving cash loans exceeding this amount.

move follows recent scrutiny of IIFL Finance, a non-bank lender, for violations of several regulatory provisions, including those governing cash loan disbursals and collections beyond statutory limit. Sources, speaking anonymously due to confidentiality concerns, reveal that this development shows that central bank's commitment to maintaining transparency and integrity in financial sector.

Despite requests for comment, Reserve Bank of India (RBI) has not issued a response. Neverless, this proactive measure highlights regulatory authority's determination to combat illicit cash transactions and ensure herence to established financial protocols within NBFCs.

With Reuters Inputs