RESERVE BANK OF INDIA
FOREIGN EXCHANGE DEPARTMENT
CENTRAL OFFICE
MUMBAI
RBI/2004/55
A.P. (DIR Series) Circular No.69
February 12, 2004
To
All Authorised Dealers in Foreign Exchange
Madam/Sirs,
FEMA, 1999 - Grant of Rupee loan to
NRIs - Liberalisation
Under the provisions of the Foreign Exchange
Management (Borrowing and Lending in Rupees) Regulations, 2000 notified vide
Notification
No. FEMA 4/2000-RB dated May 3, 2000, Authorised Dealers are allowed to
grant loans in rupees to Non-Resident Indians (NRIs) (i) against the security
of shares or immovable property in India for personal or business purposes (Regulation
7) and (ii) housing loans against the security of houses/flats to be acquired
for acquisition of residential accommodation in India (Regulation 8).
2. We have been receiving representations
from various Authorised Dealers seeking our approval for grant of rupee loans
against acceptable security to Non-Resident Indians for purposes other than
specifically prohibited.
3. On a review, it has been decided to
allow Authorised Dealers to grant rupee loans to NRIs as per policy laid down
by the bank’s Board of Directors, other than for purposes specified in para
4 below. The repayment of the loan may be made by debit to NRE/FCNR/NRO accounts
of the non-resident borrowers or out of inward remittances by the borrowers.
The quantum of loan, rate of interest, margins etc. on such loans may be decided
by the Authorised Dealers based on relevant directives issued by the Department
of Banking Operations and Development in this regard.
4. Authorised Dealers may ensure that
the proceeds of rupee loan are not utilised for any of the following activities:
- 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 (TDRs), or
- Investment in capital market including margin trading
and derivatives.
5. Necessary amendments to the Foreign
Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000 notified
vide Notification
No. FEMA 4/2000-RB dated May 3, 2000 are being issued separately.
6. Authorised Dealers may bring the contents
of this circular to the notice of their constituents concerned.
7. The directions contained in this circular
have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management
Act, 1999 (42 of 1999).
Yours faithfully,
Grace Koshie
Chief
General Manager