By its Notification No.F.E.R.A.200/99-RB dated 30th March 1999 Reserve Bank has granted general permission to resident individuals/proprietorship concerns/partnership firms to avail of interest bearing loans from NRIs/PIOs on non-repatriation basis subject to the following conditions:-

i) Such loans may be granted out of funds remitted from abroad in foreign exchange by NRIs/PIOs through normal banking channels or out of NRE/FCNR/NRO/NRSR accounts maintained by them with authorised dealers in India.

ii) The rate of interest on such loans should not exceed two percentage points over the Bank Rate prevailing on the date of granting the loan.

iii) The maturity period of the loan should not exceed 3 years.

iv) In cases where the amount of loan was received by way of remittance from abroad through normal banking channel or out of funds held in the lenders NRE/FCNR/NRO account maintained with an authorised dealer in India, payment of interest/repayment of loan should be made by credit to NRO/NRSR account of the non-resident lender with an authorised dealer in India, as desired by him. In cases where such loan was granted out of funds held in NRSR account of the lender, payment of interest/repayment of loan should be made by credit to NRSR account only of the lender maintained with an authorised dealer in India.

v) The amount of loan will not be allowed to be repatriated abroad.

vi) The amount of loan should not be utilised for the purpose of carrying on agricultural/plantation activities, purchase of immovable property, shares, debentures, bonds or for relending.

Applications for availing of loans from NRIs/PIOs on non-repatriation basis but which do not fall within the above criteria or for loans on repatriation basis, should be referred to Reserve Bank for prior approval giving full details such as name/address of lender, loan amount, rate of interest, purpose and period of the loan, repayment schedule, etc.