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Unsecured loans

Batul (Article assistant) (207 Points)

21 July 2010

How much amount of unsecured loan can an NRI give to a resident indian?? Are there any limits prescribed under FEMA??

If yes, what are the procedures??

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2 Replies

CA Amit Kumar Khaitan (Research Analyst) (360 Points)
Replied 21 July 2010

I think there is no restriction on incom ing Forex`

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Harpreet (* * * * * *) (1670 Points)
Replied 21 July 2010

1.	Short title and commencement.
	i)	These regulations may be called the Foreign Exchange Management (Deposit) Regulations, 2000.
	ii)	They shall come into force on 1st day of June, 2000.
2.	Definitions.
	In these Regulations, unless the context otherwise requires, -
	i)	'Act' means the Foreign Exchange Management Act, 1999 (42 of 1999);
	ii)	'authorised bank' means a bank including a co-operative bank (other than an authorised dealer) authorised by the Reserve Bank to maintain an account of a person resident outside India;
	iii)	'authorised dealer' means a person authorised as an authorised dealer under sub-section (1) of section 10 of the Act;
	iv)	'Deposit' includes deposit of money with a bank, company, proprietory concern, partnership firm, corporate body, trust or any other person;
	v)	'FCNR(B) account' means a Foreign Currency Non-Resident (Bank) account referred to in clause (ii) of sub-regulation (1) of Regulation 5;
	vi)	'Non-Resident Indian (NRI)' means a person resident outside India who is a citizen of India or is a person of Indian origin;
	vii)	'NRE account' means a Non-Resident External account referred to in clause (i) of sub-regulation (1) of Regulation 5;
	viii)	'NRO account' means a Non-Resident Ordinary account referred to in clause (iii) of sub-regulation (1) of Regulation 5;
	ix)	'NRNR account' means a Non-Resident Non-Repatriable account referred to in clause (iv) of sub-regulation (1) of Regulation 5;
	x)	'NRSR account' means a Non-Resident (Special) Rupee account referred to in clause (v) of sub-regulation (1) of Regulation 5;
	xi)	'Overseas Corporate Body (OCB)' means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty per cent by Non-Resident Indians and includes overseas trust in which not less than sixty per cent beneficial interest is held by Nonresident Indians directly or indirectly but irrevocably;
	xii)	'Person of Indian Origin' means a citizen of any country other than Bangladesh or Pakistan, if
		a)	he at any time held Indian passport;
			or
		b)	he or either of his parents or any of his grand- parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955);
			or
		c)	the person is a spouse of an Indian citizen or a person referred to in sub-clause ( a ) or (b);
	xiii)	'Schedule' means schedule to these Regulations;
	xiv)	the words and expressions used but not defined in these Regulations shall have the same meanings respectively assigned to them in the Act.

3.	Restrictions on deposits between a person resident in India and a person resident outside India.
	Save as otherwise provided in the Act or Regulations or in rules, directions and orders made or issued under the Act, no person resident in India shall accept any deposit from, or make any deposit with, a person resident outside India:
	Provided that the Reserve Bank may, on an application made to it and on being satisfied that it is necessary so to do, allow a person resident in India to accept or make deposit from or with a person resident outside India.
4.	Exemptions.
	Nothing contained in these Regulations shall apply to the following:
	1)	Deposits held in rupee accounts maintained by foreign [diplomatic missions and diplomatic personnel] and their family members in India with an authorised dealer.
	2)	Deposits held by diplomatic missions and diplomatic personnel in special rupee accounts namely Diplomatic Bond Stores Account to facilitate purchases of bonded stocks from firms and companies who have been granted special facilities by customs authorities for import of stores into bond, subject to following conditions:
		a)	Credits to the account shall be only by way of proceeds of inward remittances received from outside India through normal banking channels or by a transfer from a foreign currency account in India of the account holder maintained with an authorised dealer in accordance with clause 3 of this Regulation ;
		b)	All cheque leaves issued to the account holder shall be superscribed as " Diplomatic Bond Stores Account No." ;
		c)	Debits to the accounts shall be for local disbursements, or for payments for purchases of bonded stocks to firms and companies who have been granted special facilities by customs authorities for import of stores into bond;
		d)	The funds in the account may be repatriated outside India without the approval of Reserve Bank.

3)	*for Demo - please click here* ⁴ Deposits held in accounts maintained in foreign currency by [diplomatic missions, diplomatic personnel and non-diplomatic staff, who are the nationals of the concerned foreign countries and hold official passport of foreign embassies] in India subject to the following conditions:
	b)	Funds held in such account if converted in rupees shall not be converted back into foreign currency;
	c)⁴	The account may be held in the form of current or term deposit account, and in the case of diplomatic personnel [and non-diplomatic staff,] may also be held in the form of savings account;
	d)	The rate of interest on savings or term deposits shall be such as may be determined by the authorised dealer maintaining the account;
	e)	The funds in the account may be repatriated outside India without the approval of Reserve Bank.
4)	Deposits held in accounts maintained in rupees with an authorised dealer by persons resident in Nepal and Bhutan.
5)	Deposits held in accounts maintained with an authorised dealer by the United Nations Organisation and its subsidiary/affiliate bodies in India, and its or their officials in India.
	a)⁴	Credits to the account shall be only by way of :— (i) proceeds of inward remittances received from outside India through normal banking channels; and (ii) transfer of funds, from the rupee account of the Diplomatic Mission in India, which are collected in India as visa fees and credited to such account.