Borrowing from Close Relatives Abroad

A.P. (DIR Series) (2003-2004) Circular No. 24. dated 27-9-2003,
Issued by Exchange Control Department, RBI

Attention of Authorised Dealers is invited to paragraph (iv) of the Schedule to Regulation 6 of Notification No. FEMA 3/2000-RB dated May 3, 2000 in terms of which an individual resident in India is allowed by Reserve Bank, on application, to borrow a sum not exceeding USD 2,50,000 or its equivalent in foreign exchange from a close relative resident outside India, subject to the conditions indicated therein.

2. With a view to further liberalising and simplifying the existing regulations, Reserve Bank has issued Notification No. FEMA 75/2002-RB dated November 1, 2002. Accordingly an individual resident may borrow a sum not exceeding USD 2,50,000 or its equivalent from close relatives residing outside India, subject to the conditions that :

(a) the minimum maturity period of the loan is one year;

(b) the loan is free of interest; and

(c) the amount of loan is received by way of inward remittances in free foreign exchange through normal banking channels or by debit to the NRE/FCNR(B) account of the non-resident lender.

Explanation - ‘Close relative’ means relative as defined in section 6 of the Companies Act, 1956.

3. Authorised Dealers may bring the contents of the circular to the notice of their constituents concerned.

4. The directions contained in this circular have been issued under section 10(4) and section 11(1) of the FEMA, 1999 (42 of 1999).