Authorised dealers may grant any type of fund based and /or non-fund based facilities to resident individuals/firms/companies in India against the collateral of fixed deposits held in NRE accounts subject to the following conditions:-

a)There should be no direct or indirect foreign exchange consideration for the non-resident depositor agreeing to pledge his deposits to enable the resident individual/firm/company to obtain the loan/overdraft facility.

b)The period of the loan shall not exceed the unexpired period of maturity of the fixed deposit accepted as security. In addition, the non-resident depositor should furnish an irrevocable undertaking to the authorised dealer not to withdraw the deposit during the period of the loan/overdraft. There is no objection to the renewal of deposit and the loan at the request of the depositor and borrower subject to compliance with the interest rate directives of Reserve Bank.

c)Regulations relating to margin, interest rate, purpose of loan, etc., as stipulated by Reserve Bank from time to time should be complied with.

d)The loan should be utilised for personal purposes or for carrying on business activities other than agricultural/plantation activities.



e)

i)The loan should be granted by the bank against the NRE fixed deposit(s) issued by the same bank (irrespective of its branch) and not by any other bank.

ii)The branch giving the loan should hold the original deposit receipt(s) against which the loan is granted and the branch which has issued the receipt should be advised of the lien.

iii)Loans against NRE deposit(s) to the depositor himself or to a third party is granted only under his specific request/mandate and after verifying the authenticity of the signature of the depositor.


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.