(i)Authorised dealers may grant loans/overdrafts in India to the account holders themselves for purposes other than investment in India, provided that the advances are fully secured by the fixed deposits and regulations relating to normal margin, interest rate, etc. are complied with. Repayment will have to be made either by adjustment of the deposit or by fresh remittances in foreign exchange from abroad. The loan can also be repaid out of local rupee resources held in the NRO account of the borrower subject to the condition that the loan repaid from local resources would be charged interest at commercial rate as in force from time to time. (ii)Authorised dealers may also grant loans/overdrafts in India to the account holders themselves for purposes of making direct investment in India on non-repatriation basis by way of contribution to the capital of Indian firms/companies engaged in manufacturing/industrial activities, export oriented trading activities, hospitals, hotels of 3 star or higher grades, shipping, development of computer software and oil exploration services subject to compliance with the following conditions:
(a)The concerned Indian investee company intends to issue shares to NRIs on non-repatriation basis in terms of Reserve Banks Notification No. FERA.114/92-RB dated 27th April 1992.
(b)The period of loan shall not exceed the unexpired period of maturity of NRE fixed deposit accepted as security. 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)The loan amount shall be disbursed to the investee firm/company on behalf of the NRI account holder.
(d)Investment made out of the loan shall not be allowed to be repatriated outside India at any time in future. (For repatriation of income earned please see paragraph 10C.24A).
(e)The loan will be repaid together with interest thereon either by remittance from abroad or by utilisation of maturity proceeds of his NRE deposits accepted as security. The loan can also be repaid out of local rupee resources held in NRO account of the NRI borrower in India subject to the condition that the loan repayable from local resources would be charged interest at commercial rate as in force from time to time.
(f)Requirements regarding margin, interest rate etc. as stipulated by Reserve Bank from time to time are complied with.
(iii)Authorised dealers may grant loans to non-resident individuals of Indian nationality and foreign citizens of Indian origin against their NRE deposits in India for the purpose of acquisition of flats/houses in India for their own residential use subject to the following conditions:
(a)The period of loan does not exceed the period of unexpired maturity of the NRE deposits accepted as security. 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.
(b)The loan will be repaid together with interest thereon either by remittance from abroad or by utilisation of maturity proceeds of the NRE deposit/s accepted as security. The loan can also be repaid out of local rupee resources held in NRO account of the NRI borrower in India subject to the condition that the loan repayable from local resources would be charged interest at commercial rate as in force from time to time.
(c)The house/flat to be acquired/constructed with the loan should be meant for residential use of the borrower and not for any commercial purpose.
(d)The sale proceeds of the house/flat, if sold, will not be allowed to be repatriated outside India. (For repatriation of income earned by way of rent please see paragraph 10C.24A).
(e)Requirements regarding margin, interest rate, etc. as stipulated by Reserve Bank from time to time are complied with.
(f)Acquisition of the property by foreign citizens of Indian origin will be subject to Reserve Banks approval under Section 31 of FERA, 1973.
NOTE: The above facility will, however, not be available for OCBs.
Applications not covered by foregoing provisions should be referred to Reserve Bank in form LOV 1 for consideration.