RBI warns NBFCs defying cash loans limit

“If RINL can’t produce steel, it will not get cash. If it doesn’t get cash, it will shut,” the first person said.

RINL and the Adani Group did not respond to Mint’s emails seeking comment.

To be sure, the company is importing supplies via the nearby Visakhapatnam Port Trust in the interim to keep its furnaces

ONLY one of RINL’s three blast furnaces is running at present due to the shortage of coal

Union ministry of steel. The plant was established in 1982 with an objective to generate employment and boost industry in Visakhapatnam, Andhra Pradesh.

The government had in 2021 identified the loss-making company as one of the assets that will be privatized as part of a wider divestment drive. However, no headway has been made on that front amidst local political opposition.

The unlisted company made a loss of over ₹2,859 crore in FY23. It needs ₹400500 crore a month to run its operations, said the first of the two people cited above. This person estimated that the company has 6-12 months of runway before it runs into a serious financial trouble.

Meanwhile, recapitalization of the asset is not an option that the government is considering, according to a third person. All the three people spoke to on the condition of anonymity.

THE steelmaker’s management is running pillar to post to evacuate its goods from the port

running. However, that port is already overloaded because of the shutdown of the Gangavaram port.

Gangavaram port is the primary route for raw materials import for RINL. A conveyor belt connects the steelmaker to the port for raw material transport.

RINL is a Navratna company under the

India’s central bank on Wednesday warned some non-bank lenders against disbursing cash loans in excess of the permissible limit of ₹20,000 ($240), according to two persons and a letter seen byReuters, a move that is likely to stop large cash payouts to those borrowing against gold.

The central bank’s advisory comes within weeks of regulatory action against IIFL Finance, India’s second-largest gold loan player, for violation of cash disbursal and other norms.

Retail credit in India has been growing at a rapid clip, with loans against gold rising threefold over the last four years.

A significant portion of gold loans are being disbursed in cash, at least a dozen people told Reuters.

None of the persons wished to be identified as they are not authorized to speak with the media.

India prohibits lenders from handing out cash loans in excess of ₹20,000 to customers, as per income tax rules.

Non-bank finance companies (NBFCs) have been flouting this rule and have been handing over large cash loans by asking customers to sign an ‘indemnity’ for accepting liability against incometax actions, these people told Reuters.

This has resulted in the Reserve Bank of India (RBI) stepping up vigilance against non-complying lenders to protect customer interest and avoid build up of systemic risk, one of the persons said.

On Wednesday, the RBI’s letter reiterated the law.

“Please refer to provisions of Section 269SS of Income Tax Act, 1961, which stipulates that no individual can receive more than ₹20,000 as loan amount in cash,” the central bank said.

“Consequently, no NBFC should disburse loan amount in excess of ₹20,000 in cash.”

The central bank did not immediately respond to an email seeking comments.Nonbank lenders that give out loan against gold “have been facing intense competition from smaller players”.

RBI’s move is likely aimed at curbing gold loans—typically given in cash— that have jumped in recent years