Non-banking finance companies (NBFCs) have knocked on the doors of the revenue department seeking flexibility in acceptance of cash for loan repayments.
NBFCs should be allowed to accept cash even if the loan amount being repaid exceeds ₹20,000, the Finance Industry Development Council (FIDC) has petitioned the revenue department.
FIDC is a self-regulatory organisation-cum-representative body of asset-financing NBFCs. Its move comes close on the heels of the Reserve Bank of India — in a March notification — mandating all NBFCs not to disburse loans or accept repayments in cash where the aggregate loan amount is more than ₹20,000.
“We have sought exemption from Section 269 T only for collection/acceptance of loan repayments from borrowers. We want leeway to accept cash above ₹20,000,” Raman Aggarwal, Chairman, FIDC, told
The business model of NBFCs has been damaged ever since the RBI mandated that income tax restrictions around acceptance of cash would strictly apply on NBFCs too with immediate effect.
Aggarwal said FIDC’s latest demand (exemption from Section 269 T) could be met through a revenue department notification and there won’t be any need to amend the income tax law. “We are just asking for a limited one-point relaxation. We also don’t see scope of any money laundering as there will be no leakage,” he said.
NBFCs need to be put on a par with banks and, more importantly, with co-operative banks, as they are exempted from such restrictions under the income tax law, he added.
Aggarwal said the industry was faced with certain practical and operational issues with regard to implementation of the provisions of Section 269 T, that too relating to repayment of loans only.
In its submission to Revenue Secretary Hasmukh Adhia, FIDC has said that a significant part of NBFCs’ customer base is constituted by small businesses, road transport/taxi operators, agriculturists and contractors. The extent of coverage through banking channels is still not to the extent desirable and the prevalence of cash transactions cannot be denied, the FIDC said. Many NBFCs get their instalments from customers on monthly or even more frequent basis in cash through a door-to-door collection model. Practically, there is no viable alternative that exists as on date, according to FIDC.
As for defaulting customers, where a cheque or an electronic banking transaction has bounced, NBFCs have no option but to insist on cash or a pay order from the defaulters, irrespective of the amount. In certain cases, the overdue amount or the loan outstanding may be more than ₹20,000, the FIDC said.