Rupee loan to an NRI/PIO by a resident individual

A resident individual is permitted to make a rupee loan to an NRI/PIO who is a close relative of the resident individual (‘relative’ as defined in Section 2(77) of the Companies Act, 2013 by way of crossed cheque/ electronic transfer subject to the following conditions:

1. The loan amount shall be within LSR limit of USD 250000 or equivalent in other foreign currencies in a financial year (April to March).
2. The loan so provided should be interest free and the minimum maturity period of the loan is one year.
3. The loan provided shall be utilized for meeting the borrower’s personal requirements or for his own business purposes in India. The loan amount cannot be remitted outside India.
4. The loan amount cannot be utilized either singly or in association with other person, for any of the activities in which investment by persons resident outside India is prohibited, namely; (i)  the business of chit fund, or (ii)    Nidhi Company, or (iii) agricultural or plantation activities or in real estate business*, or construction of farmhouses, or (iv)  trading in Transferable Development Rights (TDRs).
5. The loan amount should be credited to the NRO a/c of the NRI /PIO. Credit of such loan amount may be treated as an eligible credit to NRO a/c.
6. The loan shall be repaid only by way of inward remittances through normal banking channels or by debit to the Non-resident Ordinary (NRO)/ Non-resident External (NRE) / Foreign Currency Non-resident (FCNR) account of the borrower or out of the sale proceeds of the shares or securities or immovable property against which such loan was granted.

[*The real estate business mentioned above shall not include the development of townships, construction of residential/commercial premises, roads, or bridges.]