What are the conditions apply for loan against FCNR/NRE deposits?

1. Q: Is there any upper limit for loans against security of NRI’s term deposits like FCNR/NRE?

Ans.: Except usual margin requirement, no upper ceiling is prescribed for loans to NRIs or third parties in India against security of FCNR/NRE deposits. However, the loan shall be for the purpose other than the investments specified in FEMA Acts 1999.

2. Whether the loan amount can be credited to NRE account of the depositor?

Ans.: Crediting of loan proceeds to NRE accounts of the account holders is not permitted. The Loan granted against the security of NRE deposits are disbursed in Indian Rupees and are non-repatriable. Therefor the loan amount should be credited to depositor’s Non-Resident Ordinary account (NRO) only.

3. What will be the maximum period of such loans?

Ans.:  The period of loan shall not exceed the unexpired period of maturity of the NRE/FCNR fixed deposit accepted as security.

4. Whether loan can be granted on the basis of application made by the power of attorney of the depositor?

Ans.: No. Loan cannot be granted against these deposits on the basis of power of attorney.

5. What is the process involved in granting loan to a third party against the deposits of NRI?

Ans.: Normally, documentation of third party loan is done in the branch where the loan is disbursed. The loan documents shall be executed by the depositor himself in the presence of branch officials and a witness acceptable to the bank.

6. What are the other formalities?

Ans.: Whenever loan application is received by a branch it will directly contact the depositor by phone or fax or e-mail to confirm the genuiness of the loan application. The loan against NRI deposits are disbursed by the bank only after confirming the genuiness of the loan application received by it. Normally, loan disbursing branch call for a copy of the depositor’s passport along with the loan application to ensure due diligence.