Grant of Rupee Loans to NRI/PIO Employees of Indian Body Corporate

A.P. (DIR Series) (2003-2004) Circular No. 27, dated 10-10-2003, Issued by Exchange Control Department, RBI

Attention of authorised dealers is invited to Regulation 8 of Notification No. FEMA 4/2000-RB dated May 3, 2000, in terms of which an authorised dealer or a housing finance institution in India approved by the National Housing Bank may provide housing loan to a Non-Resident Indian or a person of Indian origin resident outside India for acquisition of a Residential accommodation in India subject to conditions indicated therein.

2. On a review, it has been decided to grant general permission to Indian companies, viz., a body corporate registered or incorporated in India, to grant rupee loans to its employees who are Non-Resident Indians or Persons of Indian Origin, subject to the following conditions :

(i) The loan shall be granted only for personal purposes including purchase of housing property in India;

(ii) the loan shall be granted in accordance with the lender’s Staff Welfare Scheme/Staff Housing Loan Scheme and subject to other terms and conditions applicable to its staff resident in India;

(iii) the lender shall ensure that the loan amount is not used for the purposes specified in sub-clauses (i) to (iv) of clause (1) and in clause (2) of Regulation 6 of Notification No. FEMA.4/2000-RB dated May 3, 2000, referred to above;

(iv) the lender shall credit the loan amount to the borrower’s NRO account in India or shall ensure credit to such account by specific indication on the payment instrument;

(v) the loan agreement shall specify that the repayment of loan shall be by way of remittance from outside India or by debit to NRE/NRO/FCNR Account of the borrower and the lender shall not accepted repayment by any other means.

Accordingly, Notification No. FEMA. 67/2000-RB dated August 20, 2002 has been issued. A copy of the said notification is enclosed. Necessary amendments to Notification No. FEMA. 4/2000-RB dated May 3, 2000 may please be made.

3. Authorised Dealers may bring the contents of this 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).