A.P. (DIR Series) (2003-04) Circular No. 69, dated 12-2-2004
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:
a. The business of chit fund, or
b. Nidhi Company, or
c. Agricultural
or plantation activities or in real estate business, or construction of farm
houses, or
d. Trading in Transferable Development Rights (TDRs), or
e. 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).