Authorised dealers may grant loans/overdrafts to resident individuals/firms/companies in India against the security of deposits held in NRO accounts, subject to the following terms and conditions.

(a)The loans should be utilised only for meeting borrowers personal requirements and/or business purpose and not for relending or investment in shares/securities/real estate or for undertaking agricultural and plantation activities.

(b)The funds held in NRO accounts of the lender should be his own funds and not borrowed funds.

(c)Regulations relating to normal margin, rate of interest as stipulated by Reserve Bank from time to time should be complied with. Before granting such loans authorised dealers may obtain an undertaking from the resident borrower to the effect that the loan amount will be utilised for meeting his personal/business requirements and not for other purposes referred to in (a) above.

Authorised dealers should apply the usual norms and considerations as they do in the case of advances to trade/industry and satisfy themselves as to the acceptability of purpose, genuineness of credit needs of the borrower and end-use of funds and need not be guided solely by the availability of security.