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Master Direction Borrowing and Lending transactions in Indian Rupee between Persons Resident in India and Non-Resident Indians/ Persons of Indian Origin

FEMA - 6/2015-16 - Dated:- 1-1-2016 - RBI/FED/2015-16/2 FED Master Direction No. 6/2015-16 January 1, 2016 To All Authorised Dealer Category - I banks and Authorised Banks Madam/ Dear Sir, Master Direction - Borrowing and Lending transactions in Indian Rupee between Persons Resident in India and Non-Resident Indians/ Persons of Indian Origin Borrowing and lending transactions in Indian Rupees (INR) between persons resident in India and Non-Resident Indians/Persons of Indian Origin are governed b .....

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ons 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 .....

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n the Regulations or the manner in which relative transactions are to be conducted by the Authorised Persons with their customers/ constituents. The Master Direction issued herewith shall be amended suitably simultaneously. Yours faithfully (B P Kanungo) Principal Chief General Manager Index PART I 1. Important Terms Used in the Master Direction 2. Persons Resident in India borrowing in INR from NRIs/ PIOs 2.1 Two routes of borrowing 2.1.1 Borrowing in INR by persons other than companies in Indi .....

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idual 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 7.2 Change of the status of the lender to a person resident outside India PART II 8. Overdraft by Authorised Dealer to its Branches/Correspondent Banks/Head Office outside India Appendix Acronyms FCNR (B): Foreign Currency Non-Resident (Bank). FED: Foreign Exchange Department. FEMA: Foreign Exchange Management Act, 1999. E .....

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NR) 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 .....

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e terms Person Resident in India and Person Resident outside India shall have the same meanings as assigned to them in Sections 2(v) and 2(w) of the Foreign Exchange Management Act, 1999 (FEMA). 1.5 Relative means a relative as defined under the Companies Act, 1956/ 2013: Act of 1956 Act of 2013 U/s 6: MEANING OF "RELATIVE" A person shall be deemed to be a relative of another, if, and only if, (a) they are members of a Hindu undivided family ; or (b) they are husband and wife ; or (c) .....

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-son) Son's wife Son's wife Daughter (including step-daughter) Daughter Father's father Daughter's husband Father's mother Brother (including step-brothers) Mother's mother Sister (including step-sisters) Mother's father - Son's son - Son's son's wife - Son's daughter - Son's daughter's husband - Daughter's husband - Daughter's son - Daughter's son's wife - Daughter's daughter - Daughter's daughter's husband - Brothe .....

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sions mentioned in the Master Direction may be read accordingly. 2. Persons Resident in India borrowing in INR from NRIs/PIOs 2.1 Available routes for borrowing: Persons resident in Indian may borrow in INR from NRIs/PIOs under the following two routes: 2.1.1 Borrowing in INR by persons other than companies in India: A person resident in India, not being a company incorporated in India, may borrow in INR from NRIs/PIOs after satisfying the following terms and conditions: Borrowing shall be only .....

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f the lender. 2.1.2 Borrowing in INR by companies in India: A company incorporated in India may borrow in INR, on repatriation or non-repatriation basis, from NRIs/PIOs after satisfying the following terms and conditions: i. Borrowing company does not and shall not: Carry on agricultural/plantation/real estate business; or Trade in transferable development rights; or Act as Nidhi or Chit fund company. ii. Borrowing is by issuance of non-convertible debentures (NCDs); iii. The issue of NCDs is ma .....

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shares/convertible debentures for foreign direct investment in India. Further, the funds towards borrowing should be received through inward remittance from outside India or by debit to NRE/FCNR (B) account of the investor maintained with an authorised dealer or an authorised bank in India; vii. If the borrowing is on non-repatriation basis from NRIs/PIOs then the amount of loan should be received either by inward remittance from outside India or by debit to NRE/NRO/FCNR(B)/NRNR/NRSR account of .....

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f 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. .....

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resses of authorised dealers through whom the remittance has been received; as also 2.2.2 Issue of NCDs, full details of the investment, viz., (a) a list containing names and addresses of NRIs and number of NCDs issued to each of them on repatriation and/or non-repatriation basis and (b) a certificate from its Company Secretary that all applicable provisions in regard to issue of NCDs have been duly complied with. 3. Lending by authorised dealers in INR to NRIs 3.1 Lending for own requirements o .....

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able even if the loan is utilised in association with other person; The loan amount shall not be remitted outside India or credited to NRE/FCNR(B)/NRNR account of the borrower; The directives of RBI on such loans and directives on advances against shares/securities/immovable property shall be duly complied with; The repayment of loan should be either by inward remittance from outside India or by debit to NRE/NRO/FCNR(B)/NRNR/NRSR account of the borrower and/or out of sale proceeds realised throu .....

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for investment in capital market including 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 sha .....

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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 in INR by an authorised dealer or a housing finance institution to NRI/PIO for housing purpose An authorised or a housing finance institution in India approved by the National Housing Bank (NHB) may provide housing loan to a NRI or a PIO for acquisition of a residential accommodation in Indi .....

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other charges, if any, shall be paid by remittances from outside India or out of funds in NRE/ FCNR(B)/ NRNR/ NRO/ NRSR account of the borrower or out of rental income derived from renting out the property acquired or by any relative of the borrower in India by crediting the borrower's loan account through account to account transfer; The rate of interest on the loan shall conform to the directives issued, if any, by the RBI and/ or NHB. 5. INR loans by Indian body corporate to its NRI/PIO e .....

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the purposes mentioned under 2.1.3 above; The lender shall credit the loan amount to the borrower's NRO account or shall ensure credit to such account by specific indication on the payment instrument; The repayment of loan shall be made only by way of remittance from outside India or from NRE/NRO/FCNR(B) account of the borrower and by no other source. This condition shall be inbuilt in the loan agreement. 6. INR Loans to NRI by Resident Individual A resident individual may grant INR loan to .....

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mitted 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 Ind .....

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unt of the borrower. 7.2 Change of the status of the lender to a person resident outside India: In case a rupee loan was granted by a person resident in India to another person resident in India and the lender subsequently becomes a person resident outside India, the repayment of the loan by the resident borrower should be made by credit to the NRO account of the lender. PART II 8. Overdraft by Authorised Dealer to its Branches/Correspondent Banks/Head Office outside India An authorised dealer m .....

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