< The Authorized Dealers' Obligations in respect of Exchange Control Regulations pertaining to loans to NRIs
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The Authorized Dealers’ Obligations in respect of Exchange Control Regulations pertaining to loans to NRIs

There are certain guidelines pertaining to loans to NRIs. Authorized dealers can grant loans to individual holders of NRI bonds issued by State Bank of India for the following purposes:

(a) For purchase of house/flat required for the bona-fide residential use of NRI bondholder or members of his family in India.

(b) For purchase of immovable properties in India which are necessary for or incidental to carrying on trading, commercial or industrial activities by the NRI bondholder.

(c) For making direct investment on non-repatriation basis, in the capital of Indian companies engaged in manufacturing/industrial activities, export-oriented trading activities, hospitals, hotels of 3 star and higher grades, shipping, development of computer software and oil exploration services.

(d) For purchase of shares/debentures of Indian companies through recognized stock exchanges in India under the portfolio investment scheme, on repatriation basis, through designated bank branches.

(e) For meeting any other bona-fide personal financial requirements in India for the bondholder.

Loan should not be granted for carrying on any agricultural/plantation activities in India or to undertake real estate business. The amount of loan should not exceed 75% for the value of NRI bonds. Interest rate on loan should be as per the guidelines of RBI. The period of loan should not exceed the unexpired maturity of the NRI bonds.

In case of joint holding, loan can be granted only to the first holder. The loan should be disbursed by credit to the NRO account of the NRI bond-holder. Repayment of loan and payment of interest should be made either by fresh remittance in foreign exchange or out of funds held in borrower’s NRE/FCNR/ NRO account or out of maturity proceeds of the bonds.

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