Loans to and from NRI

Yes, a RI can lend money in Rupees to his NRI relative (as defined by Companies Act) by way of crossed cheque /electronic transfer within the overall limit of USD 2,50,000/- per FY under LRS. The loan should be interest free and have a maturity of minimum 1 year. Repayment of loan shall be made by way of inward remittances from outside India or by debit to NRE/NRO/FCNR (B) a/c of the NRI relative or out of the sale proceeds of shares/securities/immovable property against which such loan was granted.

The loan in Rupee shall be utilised for meeting the NRI relative’s personal requirements or for NRI relative’s own business purposes in India. It shall not be utilised for any of the activities in which investment by a NRI is prohibited, namely:

  • the business of chit fund, or
  • Nidhi Company, or
  • agricultural or plantation activities or in real estate business*, or construction of farm houses, or
  • trading in Transferable Development Rights.

*restriction on real estate does not include development of townships, construction of residential/ commercial premises, roads or bridges.

It would be the responsibility of the lender (i.e. RI) to ensure that amount of loan is within the limits prescribed under LRS during the FY.

Funds borrowed in rupees from NRI close relative shall be utilized by Resident Indian for his own business purpose only other than certain specified businesses*. He is not permitted to utilize the loan funds for any investment, whether by way of capital or otherwise, in any company/ partnership firm/ proprietorship concern or any entity, or for relending.
* the business of chit fund, as Nidhi Company, agricultural or plantation activities or real estate business; or construction of farm houses, or trading in Transferable Development Rights.
Provided that RBI may permit such resident entities/ companies to use such borrowed funds:
(a) For on lending/ re-lending to the infrastructure sector; or
(b) For keeping in fixed deposits with banks in India pending utilization by them for permissible end-uses.

Yes, NRI is permitted to avail loan from AD Bank in Rupee subject to certain specified restrictions and:
-against the security of shares and others held in name of NRI, or
-against security of immovable property (other than agricultural land / plantation property / farm house) held by NRI in accordance with RBI regulations

A RI may borrow in Rupee from NRI relative on non-repatriation basis after satisfying the following terms and conditions:
-Loan shall be received by way of inward remittance from outside India or out of NRE/ NRO/ FCNR (B)/NRNR/NRSR a/c of NRI maintained with an authorised dealer or an AD Bank in India.
-The period of loan shall not exceed 3 years and rate of interest shall not be more than 2% above the bank rate prevailing on date of availment of loan.
-The repayment of loan amount along interest thereof shall be made only to the NRO account of the NRI
-The borrowed amount is not permitted to be repatriated outside India.

Yes, an individual resident Indian can borrow in foreign currency, a sum not exceeding USD 250,000/- or its equivalent from his close relatives NRE outside India, subject to following conditions:
-minimum maturity period of loan is 1 year;
-loan is free of interest; and
-amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to NRE/FCNR a/c of NRI.

She can freely avail loan/ overdraft against securities of her NRO/NRE FDs in India without any monetary ceiling subject to end-use conditions as specified under FEMA.

Third-party being RI, firms or companies resident in India can avail loan/overdraft against security of NRO deposits for personal/business purposes, subject to stipulated terms and conditions.However, loan amount cannot be utilized for relending, agricultural/plantation activities or real estate business.

Yes, NRI is permitted to acquire loan in INR from the Bank till the extent of 90% of the purchase price in INR of the ESOPs or Rs. 20 lakhs per NRI employee whichever is lower. The loan amount shall be directly paid to the company and should not be credited to NRI’s non-resident a/c in India. Additional conditions have been laid down by RBI for the same.

It is clarified that use of credit card in India by a person resident outside India shall not be deemed as borrowing or lending in rupees.

An AD Bank may allow continuance of loan/ overdraft granted to a person resident in India who subsequently becomes a person resident outside India, subject to following terms and conditions:
• AD Bank is satisfied, according to his/ its commercial judgment, about the reasons to continue the loan or overdraft;
• The period of loan or overdraft shall not exceed the period originally fixed at the time of granting the loan/ overdraft;
• So long as the borrower continues to a remain a person resident outside India, the repayment shall be made either by inward remittance from outside India through normal banking channels or from the funds held in NRE/ FCNR(B)/ NRNR/ NRO/ NRSR a/c of the borrower.

In case INR loan was granted by a person resident in India to another person resident in India and the lender subsequently becomes a non-resident, the repayment of loan by the resident borrower should be made by credit to NRO a/c of the lender maintained with AD bank in India, at the option of the lender.

No. As per FEMA provisions, Indian Company is not permitted to avail loan from NRI. Alternatively, NRIs can provide deposits to Indian company or invest in Non-convertible Debentures offered by the Company.

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