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 sources and a letter seen by Reuters, 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 three-fold over the last four years.

A significant portion of gold loans are being disbursed in cash, at least a dozen sources told Reuters. None of the sources wished to be identified as they are not authorised 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 (NBFC) have been flouting this rule and have been handing over large cash loans by asking customers to sign an ‘indemnity’ for accepting liability against income-tax actions, sources 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 sources said.

Meanwhile, RBI Shaktikanta Das on Wednesday discussed with banks and other stakeholders ways to scale up the UPI ecosystem, expand products and foster innovative payment solutions, reports PTI.

Unified Payments Interface (UPI) is an instant real-time payment system developed by the National Payments Corporation of India (NPCI) to facilitate inter-bank transactions through mobile phones.

Das held a meeting on Wednesday with major stakeholders in the UPI ecosystem — banks, NPCI, third-party application providers and technology service providers — to discuss potential strategies for further expanding the reach of UPI, the RBI said in a statement. Reuters