RBI's advisory will not affect Manappuram's business, says MD & CEO

The Reserve Bank of India's (RBI's) advisory to non-banking finance companies (NBFCs), asking them not to disburse gold loans in cash exceeding Rs 20,000, will not hamper its business, said V P Nandakumar, managing director and chief executive officer of Manappuram Finance.

The RBI recently advised NBFCs extending gold loans not to lend in cash exceeding Rs 20,000, citing the Income Tax Act.

According to Nandakumar, online gold loans, which form 50 per cent of their gold loan portfolio, follow a fully paperless process for application and disbursement.

Even for the loans originating at branches, most of our customers prefer direct transfers. Moreover, our employees are trained to convince customers of the same as it promotes smooth operations, Nandakumar said.

Referring to Section 269SS of the Income Tax Act, 1961, which stipulates that no individual can receive more than Rs 20,000 as a loan amount in cash, the regulator said that no NBFCs can disburse loan amounts in cash exceeding Rs 20,000.

Nandakumar also said that the company has followed a fully compliant process and will continue to do so, and he does not believe that the advisory will discourage customers from taking gold loans. We believe that the RBI has issued the advisory to promote transparency and prevent potential disputes, and we support the same, he added.

The regulator has asked gold loan NBFCs to strictly adhere to the provisions of the Income Tax Act, according to a communication with these companies reviewed by Business Standard.

In March, the RBI restricted IIFL Finance from sanctioning and disbursing new gold loans, citing material supervisory concerns and to protect the interests of customers. One of the concerns was related to higher cash disbursement than stipulated by the norms.

www.business-standard.com dt. 10.05.2024