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Under this system, an NRI would provide a loan to a resident Indian/ Indian Company. There are certain restrictions which would be placed on the borrowing limit of the loan. These restrictions would be placed by the Reserve Bank of India (RBI). Apart from this institution, the Authorized Dealer (Bank or Financial Institution) would have regulation of NRI loans to resident Indian. A resident Indian or a Company can borrow money from an NRI subject to certain conditions.
Lending and borrowing is regulated by the Ministry of Finance and the Reserve Bank of India
The laws which apply here are:
1. Foreign Exchange Management Act of 1999.
2. Master Direction on Borrowing and Lending transaction in Indian Rupee between Persons Resident in India and Non-Resident Indians issued by the Reserve Bank of India on January 1, 2016.
3. Foreign Exchange Management (Borrowing or lending in foreign exchange) Regulations, 2000.
The following conditions have to be followed for NRI Loans to Resident Indian/ Indian Company:
Also, Read: Money Transfer from Overseas / NRIs to India.
For a resident Indian receiving loan from an NRI:
For an Indian Company receiving a loan from an NRI:
Read, Also: Can an Indian Citizen Borrow from a Foreign National/ NRI?.
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