Borrowing and Lending Rules for NRIs under FEMA – Casela Advisors

At Casela Advisors, we assist NRIs and Resident Indians in navigating the complex rules under FEMA regarding borrowing and lending transactions between residents and non-residents. These transactions are subject to detailed guidelines issued by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA), 1999.

Whether you’re an NRI lending to a relative in India or a Resident Individual borrowing from an NRI, it is vital to ensure full FEMA compliance to avoid legal and financial penalties.

📝 Background: FEMA Regulations on Borrowing and Lending

Previously governed under separate regulations for INR and foreign currency transactions, the RBI in 2018 consolidated the framework through the:

Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, which now governs all borrowing/lending transactions in Indian Rupees or foreign exchange.

These consolidated rules supersede:

FEMA (Borrowing and Lending in Indian Rupees) Regulations, 2000
FEMA (Borrowing and Lending in Foreign Exchange) Regulations, 2000

🔹 Part A: Borrowing by NRIs in Indian Rupees (INR)

NRIs and OCI Cardholders are allowed to borrow INR in the following ways:

1. From Authorized Dealers (Banks in India)

✅ Purposes allowed:

Personal requirements of NRI
Business purposes
Purchase of residential property (no restriction on number)
Purchase of motor vehicles
Any other legally permitted purpose

✅ Overdraft Facility:

NRIs can avail overdraft up to INR 5 billion through overseas branches of Indian banks.

2. From Resident Relatives in India

NRIs can borrow up to the LRS limit (currently USD 250,000 or equivalent) from a Relative resident in India.

Who qualifies as a Relative?

Spouse
Parents, step-parents
Son/daughter and their spouses
Siblings, step-siblings

📌 Note: The loan must comply with RBI’s terms under FEMA and should be interest-free and non-repatriable unless otherwise approved.

3. From Registered NBFCs or Housing Finance Companies

NRIs may obtain loans for housing or vehicle purchases from RBI-registered NBFCs or housing finance institutions, subject to compliance conditions.

4. From Indian Employer

NRIs employed in India may borrow under the Staff Welfare Scheme as per the rules laid down by the RBI.

🔹 Part B: Borrowing by NRIs in Foreign Currency

✅ Permissible Route:

NRIs can avail foreign currency loans from the overseas branches of Authorized Dealer banks in India, against the security of funds in their NRE/FCNR deposits.

❌ Not allowed:
NRIs cannot borrow foreign currency directly from resident individuals unless prior RBI approval is obtained.

🔹 Part C: Borrowing by Resident Individuals in INR

Resident Indians can borrow from NRIs or OCI Cardholders:

Only from relatives abroad, as per RBI conditions
Subject to the INR 250,000 (LRS) limit
Loans must be interest-free and non-repatriable
Funds must be routed through NRO/NRE/FCNR accounts, per FEMA Deposit Regulations, 2016

🔹 Part D: Borrowing by Resident Individuals in Foreign Exchange

Residents in India may borrow up to USD 250,000 or equivalent from relatives residing outside India, for personal use.

Also allowed:

Indian students studying abroad may raise loans up to USD 250,000 for tuition and living expenses.

🚫 Restricted Use of Borrowed Funds

Whether the loan is in INR or Forex, borrowed funds cannot be used for:

Chit fund business
Nidhi companies
Investment in capital markets (margin trading, derivatives, etc.)
Agriculture or plantation activities
Real estate trading or farmhouse construction
Trading in Transferable Development Rights (TDRs)

🔁 Other Key Provisions

📌 1. Use of Credit Cards

Use of a credit card by:

An NRI in India or
A Resident outside India
is not considered borrowing/lending under FEMA.

📌 2. Change in Residential Status

FEMA allows the continuation of loan even if the residential status of the borrower/lender changes:

A loan to a resident who becomes NRI can continue under existing terms.
If a resident lender becomes NRI, repayment should be credited to their NRO account.
If an NRI lender becomes a resident, repayment can be made to their designated account.

📌 3. Borrowing Under Erstwhile Regulations

Loans taken under previous regulations can continue until maturity, as long as conditions are followed.

📌 4. Repatriation Not Permitted

Borrowed funds cannot be repatriated outside India unless specifically allowed by the RBI.

📌 Important Compliance Advice by Casela Advisors

At Casela Advisors, we strongly recommend:

✔️ Structuring borrowing/lending agreements in line with RBI’s prescribed limits
✔️ Drafting FEMA-compliant loan documentation
✔️ Reporting to RBI when required
✔️ Avoiding prohibited transactions that could result in penalties under FEMA

We provide professional assistance to both NRIs and Resident Indians for:

Drafting Loan Agreements
Evaluating FEMA Compliance
LRS and ECB Compliance
Taxation on Loans and Interest (if applicable)
Filing Form 15CA/CB where necessary

NRI Property Purchase & FEMA Guidelines – Casela Advisors

Planning to buy or sell property in India as an NRI or OCI? The Foreign Exchange Management Act (FEMA), 1999, governs all transactions involving acquisition or transfer of immovable property in India by persons residing outside India. At Casela Advisors, we help you navigate these complex FEMA rules with ease.

Whether you’re acquiring residential property or managing inherited real estate in India, our Chartered Accountants for NRIs ensure full FEMA and tax compliance, with expert repatriation planning.

🏠 A. Property Acquisition Rules for NRI/OCI

✅ NRIs/OCIs can acquire property in India without RBI approval in the following manner:

Nature of Property	Mode of Acquisition	Permitted From
Agricultural land, plantation property, or farmhouse	❌ Not Allowed to Purchase or Receive as Gift	N/A
(Same as above)	✅ Inheritance	Resident or non-resident (with conditions)
Residential or commercial property	✅ Purchase	Resident, NRI, or OCI
Residential or commercial property	✅ Gift	Relative who is Resident/NRI/OCI
Residential or commercial property	✅ Inheritance	Resident or non-resident (with conditions)

🔔 No cap on the number of residential or commercial properties that an NRI or OCI can buy in India (excluding agricultural land/farmhouses/plantations).

🔁 B. Transfer of Property by NRI/OCI

Nature of Property	Mode of Transfer	Permitted To
Agricultural land, farmhouse, plantation	✅ Sale or Gift	Resident Indian
Residential or commercial property	✅ Sale or Gift	Resident, NRI, or OCI

💰 Funding Sources for Property Acquisition in India

As per FEMA, payment for property purchase must be made through:

Foreign Inward Remittance (via banking channels)
NRE, NRO, or FCNR (B) accounts
Housing loans from authorized Indian banks or registered housing finance companies

❌ Not allowed: Payments via foreign currency notes, traveller’s cheques, or barter arrangements.

👩‍❤️‍👨 C. Joint Property Ownership with Resident Spouse

A foreign national (not NRI/OCI) may jointly purchase one property (excluding agricultural land/farmhouse/plantation) with their NRI/OCI spouse, if:

The marriage has lasted for at least two years
Payment is made only through approved channels
The non-resident spouse is not otherwise prohibited under FEMA (e.g., citizens of restricted countries)

🛂 D. Property Purchase by Long-Term Visa (LTV) Holders

Minority citizens of Afghanistan, Bangladesh, or Pakistan living in India on Long-Term Visas (LTV) may acquire:

One residential property for self-occupation
One property for self-employment
(Subject to Government of India conditions)

🏛 E. Property Acquisition by Embassies/Diplomats

Foreign diplomatic missions may purchase/sell property (excluding agricultural land) in India only after:

Getting clearance from the Ministry of External Affairs, and
Making payment through remittance via banking channels

🚫 F. Restrictions for Certain Foreign Nationals

Citizens of the following 11 countries face restrictions:

Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong, and North Korea (DPRK)

❌ Cannot acquire/transfer immovable property in India without RBI approval
✅ May lease property for up to five years

Other Foreign Nationals:

Residential Status	Eligibility
Resident in India (non-Indian origin)	✅ Can acquire property
Non-resident (non-Indian origin)	❌ Cannot acquire/transfer, except:

By inheritance, or
Lease not exceeding five years |

🏢 G. Acquisition by Foreign Companies or Branches

A foreign company/branch can purchase property in India to carry out permitted business activities, if:

The property is necessary or incidental to the business
A Form IPI is filed with RBI within 90 days
For nationals of the 11 restricted countries, prior RBI approval is required if property tenure exceeds 5 years

📌 Key Exceptions & Practical Guidance

✅ Grandfathering Rule

If a person acquired property while being an Indian resident or via inheritance, they may:

Continue to hold, transfer, or sell the property
No fresh FEMA compliance is required for legacy assets

💡 Casela Advisors’ Practical Tips:

Always use Indian banking channels for property payments
Retain FIRC and loan repayment documents in foreign currency to ease future repatriation
No limit on the number of residential/commercial properties NRIs/OCIs can buy (within permissible types)
All transactions must be well-documented for tax and compliance purposes

🌍 NRI Real Estate & FEMA Advisory – Casela Advisors

At Casela Advisors, we specialize in guiding NRIs, OCIs, and foreign nationals through:

✔️ FEMA-Compliant Property Acquisition
✔️ Repatriation of Sale Proceeds
✔️ Capital Gains Tax Planning on Property Sale
✔️ Drafting Gift or Sale Agreements
✔️ Filing Form 15CA/CB & TDS Compliance

📣 Looking to Buy, Inherit, or Sell Property in India as an NRI?

Connect with Casela Advisors – your trusted Chartered Accountant for NRI property transactions in India.

NRI Bank Accounts in India – Guide by Casela Advisors

If you’re a Non-Resident Indian (NRI) or Person of Indian Origin (PIO), managing finances in India begins with the right bank account. The Foreign Exchange Management Act (FEMA) permits NRIs to operate specialized bank accounts in India – each with distinct rules on repatriation, taxation, and usage.

At Casela Advisors, our experts help you choose the right account type, ensure tax compliance, and guide you on remittances, repatriation, and interest income reporting.

🏦 1. NRO Account (Non-Resident Ordinary Account)

The NRO account is designed for NRIs to manage income earned in India, such as rent, dividends, pensions, or sale proceeds of assets.

✅ Key Features of NRO Account:

Currency: Indian Rupees (INR)
Eligible Individuals: NRIs/PIOs; Pakistani/Bangladeshi nationals need RBI approval
Account Types: Savings, Current, Recurring, or Fixed Deposit
Joint Holding: Allowed with Indian residents or NRIs/PIOs
Repatriation: Up to USD 1 million per financial year (after taxes)
Loan Facility: Available in India (for self or third party)
Taxation: Interest is taxable in India and subject to TDS

💡 Ideal For:

NRIs with Indian income (e.g., rent or pension) or those needing to hold funds from India-based transactions.

🌐 2. NRE Account (Non-Resident External Account)

The NRE account is used to park foreign earnings in India, in Indian Rupees, while maintaining full repatriability and tax benefits.

✅ Key Features of NRE Account:

Currency: Indian Rupees (INR)
Eligible Individuals: NRIs/PIOs only (must open in person)
Account Types: Savings, Current, Recurring, or Fixed Deposit
Joint Holding: With another NRI or a close resident relative*
Repatriation: Fully repatriable, both principal and interest
Loan Facility: Available in India and abroad
Taxation: Interest is tax-free in India (no TDS)

*As per RBI rules, resident relatives can be joint holders on “former or survivor” basis only.

💡 Ideal For:

NRIs wanting to earn tax-free interest in India and repatriate funds freely.

💱 3. FCNR (B) Account – Foreign Currency Non-Resident (Bank) Account

The FCNR account is a foreign currency term deposit account, ideal for NRIs who want to avoid currency conversion risks.

✅ Key Features of FCNR (B) Account:

Currency: USD, GBP, EUR, JPY, AUD, CAD, or other permitted currencies
Eligible Individuals: NRIs/PIOs
Type: Fixed Deposit only, tenure between 1 to 5 years
Joint Holding: With another NRI or close relative (resident)
Repatriation: Freely repatriable principal and interest
Loan Facility: Available against deposit in India and abroad
Taxation: Interest is tax-free in India if you are a Non-Resident or RNOR under Income Tax Act

💡 Ideal For:

NRIs looking for safe foreign currency deposits in India with full repatriability and no exchange rate risks.

🧾 Need Help Choosing the Right NRI Bank Account?

At Casela Advisors, we offer:

✅ Guidance on NRE vs NRO vs FCNR account
✅ Compliance under FEMA & RBI regulations
✅ Advisory on repatriation limits and documentation
✅ Tax computation on interest income
✅ Assistance with Form 15CA/15CB for fund transfers

🧭 NRI Banking Simplified – Casela Advisors

Whether you’re opening a new account or repatriating funds overseas, trust our Chartered Accountants to guide you through every compliance step with clarity and confidence.