The Reserve Bank of India has sharply brought down the threshold above which non-banking finance companies (NBFCs) can disburse loans against gold only by cheque.

The central bank said with immediate effect such loans amounting to Rs 20,000 and above can be disbursed only by cheque as against the earlier threshold of Rs 1 lakh and above. This move is in line with the rules issued under the Income Tax Act.

This move should be seen in the backdrop of the government scrapping Rs 500 and Rs 1000 bank notes during the demonetisation period (November 9, 2016 to December 30, 2016) and its emphasis on digital payments.

The note scrapping exercise resulted in almost 86 per cent of the currency in circulation being sucked out of the economy. Viral Acharya, Deputy Governor, RBI, recently said that complete remonetisation will take a couple of more months.