TMI BlogMaster Direction – Borrowing and Lending transactions in Indian Rupee between Persons Resident in India and Non-Resident Indians/ Persons of Indian OriginX X X X Extracts X X X X X X X X Extracts X X X X ..... ns to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1999 . These directions lay down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/constituents with a view to implementing the regulations framed. 3. Instructions issued in respect of aforesaid transactions have been compiled in this Master Direction as also instructions regarding overdraft in INR account maintained by a bank outside India with an authorised dealer in India since the latter set of instructions are also part of aforesaid Regulations. The list of underlying notifications/ circulars which form the basis of this Master Direction is furnished in the Appendix. Reporting instructions can be found in Master Direction on reporting ( Master Direction No. 18 dated January 01, 2016 ) 4. It may be noted that, whenever necessary, Reserve Bank shall issue directions to Authorised Persons through A.P. (DIR Series) Circulars in regard to any change in the Regulations or the manner in which relative transactions are to be conducted by the Authorised Persons with their customers/ constituents. The Master Direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Non-Resident External. NRI: Non-Resident Indian. NRO: Non-Resident Ordinary. NRNR: Non-Resident Non-Repatriable. NRSR: Non-Resident Special Rupee. PIO: Person of Indian Origin RBI: Reserve Bank of India. TDR: Transferable Development Right. Master Direction - Borrowing and Lending transactions in Indian Rupee (INR) between Persons Resident in India and Non-Resident Indians / Persons of Indian Origin PART I 1. Important Terms Used in the Master Direction 1.1 Unless the context requires otherwise, the terms 'Authorised dealer', 'Authorised bank', 'Non-resident Indian (NRI)', 'Person of Indian origin (PIO)', 'NRE account', 'NRO account', 'NRNR account' 1 , 'NRSR account' 1 , and 'FCNR (B) account' shall have the same meanings as assigned to them respectively in Foreign Exchange Management (Deposits) Regulations, 2000 notifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s husband - Daughter's husband - Daughter's son - Daughter's son's wife - Daughter's daughter - Daughter's daughter's husband - Brother (including step-brothers) - Brother's wife - Sister (including step-sister) - Sister's husband - 1.6 The term 'Transferable Development Right (TDR)' shall have the meaning as assigned to it in the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 . Notes: With effect from April 01, 2002, no deposit, whether by way of renewal of existing deposit or otherwise, can be accepted under the NRNR account Scheme or the NRSR account Scheme. The provisions mentioned in the Master Direction may be read accordingly. 2. Persons Resident in India borrowing in INR from NRIs/PIOs 2.1 Available rout ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /NRSR account of the investor maintained with an authorised dealer or an authorised bank in India. Payment of interest and repayment of principal shall be made only to the NRO account of the lender. 2.1.3 Restriction on use of borrowed funds: Use of proceeds of funds borrowed within the provisions given under 2.1.1 and 2.1.2 is subject to the following restrictions: The proceeds shall be utilised only for the own business of the borrower other than what is mentioned at 2.1.2.i above. Additionally, construction of farm houses will also not be permitted. This restriction on real estate does not include development of townships, construction of residential/ commercial premises, roads or bridges. The proceeds shall not be used for investment or for on-lending in any manner whatsoever. The Reserve Bank may, however, permit these borrowers to use the amount so borrowed for on-lending to infrastructure sector or to keep them in fixed deposits with banks in India, pending utilisation for permissible end-uses. 2.2 Reporting Requirements: For borrowing under 2.1.2 above, the borrowing company should file with the nearest office of the RBI, not later than 30 days from the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding margin trading and derivatives. Repayment of the loan shall happen by remittance from outside India or by debit to NRE/FCNR(B)/NRO account. 3.2 Lending for acquiring shares under the Employees Stock Option Plan: An Authorised Dealer in India may grant INR loan to NRI employees of Indian companies for acquiring shares of the companies under the Employees Stock Option (ESOP) Scheme subject to the following terms and conditions: Lending for ESOP Scheme shall be as per the policy approved by the Board of the authorised dealer and shall be subjected to capital market exposure norms of the RBI and other prudential norms; The loan amount should not exceed 90 per cent of the purchase price of the shares or INR 20 lakhs per NRI employee, whichever is lower; The rate of interest and margin on such loans may be decided by the banks, subject to directives issued by the RBI from time to time; The amount shall be paid directly to the company and should not be credited to the borrowers non-resident accounts in India; The loan amount shall be repaid by way of inward remittances from outside India or by debit to NRO/NRE/FCNR(B) account of the borrower. 4. Lending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer subject to the following terms and conditions: The loan is free of interest and the minimum maturity of the loan is one year; The loan amount should be within the overall limit under the Liberalised Remittance Scheme per financial year available for a resident individual, who shall ensure that the applicable limit is not breached; The utilisation of loans shall meet the provisions given at 2.1.3.i above; The loan amount shall not be remitted outside India but shall be credited to the NRO account of the borrower; Repayment of loan shall be made by way of inward remittances from outside India or by debit to the NRO/NRE/FCNR(B) account of the borrower or out of the sale proceeds of the shares or securities or immovable property against which such loan was granted. 7. Change of status of borrower/lender from person resident in India to person resident outside India 7.1 Change of status of borrower to a person resident outside India: In case of change of status of a borrower who has taken Rupee loan/overdraft from an authorised dealer bank, from a person resident in India to a person resident outside India, the authorised dealer bank may allow continua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FEMA Notification No.287/2013-RB September 17, 2013 A.D (MA) / A.P.(DIR Series) Circular 1 A.D. (MA) Circular No. 11 May 16, 2000 2 A.P.(DIR Series) Circular No. 28 March 30, 2001 3 A.P.(DIR Series) Circular No. 28 March 04, 2002 4 A.P.(DIR Series) Circular No. 27 October 10, 2003 5 A.P.(DIR Series) Circular No. 69 February 12, 2004 6 A.P.(DIR Series) Circular No. 9 September 01, 2004 7 A.P.(DIR Series) Circular No. 93 May 25, 2004 8 A.P.(DIR Series) Circular No. 7 August 22, 2007 9 A.P.(DIR Series) Circular No. 18 September 16, 2011 10 A.P.(DIR Series) Circular No. 19 Septembe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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