FOREIGN EXCHANGE MANAGEMENT (BORROWING AND
LENDING IN RUPEES) REGULATIONS, 2000 [AMENDED UPTO 2013]
PREAMBLE
In exercise of the
powers conferred by clause (e) of sub-section (3) of Section 6, subsection (2)
of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the
Reserve Bank of India makes the regulations relating to borrowing and lending
in rupees between a person resident in India and a person resident outside
India as under, namely:
Regulation - 1. Short title and commencement.
(1) These Regulations may
be called the Foreign Exchange Management (Borrowing and Lending in Rupees)
Regulations, 2000.
(2) They shall come into
force on 1st day of June, 2000.
Regulation - 2. Definitions.
In these Regulations,
unless the context requires otherwise,
(a) 'Act' means the
Foreign Exchange Management Act, 1999 (42 of 1999);
(b) 'authorised dealer',
'authorised bank', 'Non-resident Indian (NRI)', 'Person of Indian origin',
'Overseas Corporate Body (OCB)', 'NRE account', 'NRO account', 'NRNR account',
'NRSR account', and 'FCNR account' shall have the same meanings as assigned to
them respectively in Foreign Exchange Management (Deposits) Regulations, 2000
made by Reserve Bank under clause (f) of sub-section (3) of section 6 of the
Act;
(c) 'housing finance
institution' and National Housing Bank' shall have the meaning assigned to them
in the National Housing Bank Act, 1987 (53 of 1987);
[1][(ca) 'Liberalised
Remittance Scheme' means the scheme formulated in terms of circular A.P
(DIR Series) Circular No. 64 dated February 4, 2004 and as amended from
time to time.
(cb)
'relative' means a 'relative' as defined in Sec. 6 of the Companies Act, 1956.]
(d) 'Transferable
Development Rights (TDR)' shall have the meaning as assigned to it in the
Foreign Exchange Management (Permissible Capital Account Transactions)
Regulations, 2000.
(e) The words and
expressions not defined in these regulations but defined in the Act shall have
the same meanings respectively assigned to them in the Act.
Regulation - 3. Prohibition on borrowing and lending in rupees.
Save as otherwise
provided in the Act, rules or regulations made thereunder, no person resident
in India shall borrow in rupees from, or lend in rupees to, a person resident
outside India.
Provided that the
Reserve Bank may, for sufficient reasons, permit a person resident in India to
borrow in rupees from, or lend in rupees to, a person resident outside India.
Explanation: For the
removal of doubt, it is clarified that use of Credit Card in India by a person
resident outside India shall not be deemed as borrowing or lending in rupees.
Regulation - 4. Borrowing in rupees by persons other than companies in India.
A person resident in
India, not being a company incorporated in India, may borrow in rupees on
non-repatriation basis from a non-resident Indian or a person of Indian origin
resident outside India, subject to the following conditions:
(i) the amount of loan
shall be received by way of inward remittance from outside India or out of
Non-resident External (NRE)/Non-resident Ordinary (NRO)/Foreign Currency
Non-resident (FCNR)/Non-resident Non-repatriable (NRNR)/Non-resident Special
Rupee (NRSR) account of the lender maintained with an authorised dealer or an
authorised bank in India,
(ii) the period of loan
shall not exceed three years;
(iii) the rate of interest
on the loan shall not exceed two percentage points over the Bank rate
prevailing on the date of availment of loan;
(iv) where the loan is
made out of funds held in Non-resident Special Rupee (NRSR) account of the
lender, payment of interest and repayment of loan shall be made by credit to
that account; and in other cases, payment of interest and repayment of loan
shall be made by credit to the lender's Non-resident Ordinary (NRO) or
Non-resident Special Rupee (NRSR) account as desired by the lender; and
(v) the amount borrowed
shall not be allowed to be repatriated outside India.
Regulation - 5. Borrowing in rupees by Indian companies.
(1) Subject to the
provisions of sub-regulations (2) and (3), a company incorporated in India may
borrow in rupees on repatriation or non- repatriation basis, from a nonresident
Indian or a person of Indian origin resident outside India or an overseas
corporate body (OCB), by way of investment in Non-convertible Debentures (NCDs)
subject to the following conditions;
(i) the issue of
Non-convertible Debentures (NCDs) is made by public offer;
(ii) the rate of interest
on such Non-convertible Debentures (NCDs) does not exceed the prime lending
rate of the State Bank of India as on the date on which the resolution
approving the issue is passed in the borrowing company's General Body Meeting,
plus 300 basis points,
(iii) the period for
redemption of such Non-convertible Debentures (NCDs) is not be less than three
years;
(iv) the borrowing company
does not and shall not carry on agricultural /plantation /real estate
business/Trading in Transferable Development Rights (TDRs) or
does not and shall not act as Nidhi or Chit Fund company;
(v) the borrowing company
files with the nearest office of the Reserve Bank, not later than 30 days from
the date.
(A) of receipt of
remittance for investment in Non-convertible Debentures (NCDs), full details of
the remittances received, namely; (a) a list containing names and addresses of
Nonresident Indians (NRIs)/Overseas Corporate Bodies (OCBs) who have remitted
funds for investment in Non-convertible Debentures (NCDs) on repatriation
and/or non-repatriation basis, (b) amount and date of receipt of remittance and
its rupee equivalent; and (c) names and addresses of authorised dealers through
whom the remittance has been received;
(B) of issue of
Non-convertible Debentures (NCDs), full details of the investment, namely; (a)
a list containing names and addresses of Non-resident Indians (NRIs)/Overseas
Corporate Bodies (OCBs) and number of Non-convertible Debentures (NCDs) issued
to each of them on repatriation and/or non-repatriation basis and (b) a
certificate from the Company Secretary of the borrowing company that all
provisions of the Act, rules and regulations in regard to issue of
Non-convertible Debentures (NCDs) have been duly complied with.
(2) The borrowing by
issue of non-convertible debentures on repatriation basis shall be subject to
the following additional conditions, namely:
(a) the percentage of
Non-convertible Debentures (NCDs) issued to Nonresident Indians (NRIs)/Overseas
Corporate Bodies (OCBs) to the total paid-up value of each series of
Non-convertible Debentures (NCDs) issued shall not exceed the ceiling
prescribed for issue of equity shares/ convertible debentures for foreign
direct investment in India as specified by the Reserve Bank from time to time,
under the relevant regulations, and
(b) the amount of
investment is received by remittance from outside India through normal banking
channels or by transfer of funds held in the investor's Non-resident External
(NRE)/Foreign Currency Non-resident (FCNR) account maintained with an
authorised dealer or an authorised bank in India;
(3) The borrowing by
issue of non-convertible debentures (NCDs) on non-repatriation basis shall be
subject to the following additional conditions, namely:
(a) he amount of
investment is received either by remittance from outside India through normal
banking channels or by transfer of funds held in the investor's Non-resident
External (NRE)/Non-resident Ordinary (NRO)/Foreign Currency Non-resident
(FCNR)/Non-resident Non-repatriable (NRNR)/Non-resident Special Rupee (NRSR)
account maintained with an authorised dealer or an authorised bank in India,
(b) here the investment
is made out of funds held in Non-resident Special Rupee (NRSR) account, the
interest on such Non-convertible Debentures (NCDs) shall also not be
repatriable outside India; and the maturity proceeds and interest on such
debentures are credited only to the Non-resident Special Rupee (NRSR) account
of the investor.
(4) [2][The borrowing by way
of issue of preference shares on or after 30th day of April, 2007 other than
those which are fully and mandatorily convertible into equity within a
specified time and issue of convertible debentures on or after 7th
day of June, 2007, other than those which are fully and mandatorily convertible
into equity within a specified time, to a person resident outside India, shall
be considered as debt and shall accordingly conform to Regulation 6 of the
Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations,
2000 (Notification No. FEMA. 3/2000-RB dated 3rd May, 2000) including the
limits to such Borrowings as specified in the said regulations.]
Regulation - 6. Restriction on use of borrowed funds.
No person resident in
India who has borrowed in rupees from a person resident outside India,
(1) shall use such
borrowed funds for any purpose except in his own business other than.
(i) the business of chit
fund, or
(ii) as Nidhi Company, or
(iii) Agricultural or
plantation activities or real estate business; or construction of farm houses
or
(iv) riding in
Transferable Development Rights (TDRs).
(2) shall use such
borrowed funds for any investment, whether by way of capital or otherwise, in
any company or partnership firm or proprietorship concern or any entity,
whether incorporated or not, or for relending.
[3][Provided that the
Reserve Bank may permit such resident entities/companies to use such borrowed
funds:
(a) for on
lending/re-lending to the infrastructure sector; or
(b) for keeping in fixed
deposits with banks in India pending utilization by them for permissible
end-uses.]
Explanation: For the
purpose of sub-clause (iii) of clause (1), real estate business shall not
include development of townships, construction of residential/ commercial
premises, roads or bridges.
Regulation - 7.[Loans in rupees to non-residents][4].
Subject to the
directions issued by the Reserve Bank from time to time in this regard, an
authorised dealer in India may grant loan to a non-resident Indian,
(A) against the security
of shares or other securities held in the name of the borrower, or
(B) against the security
of immovable property (other than agricultural or plantation property or farm
house), held by him in accordance with the Foreign Exchange Management
(Acquisition and transfer of immovable property in India) Regulations, 2000:
Provided that
(a) the loan shall be
utilised for meeting the borrower's personal requirements or for his own
business purposes; and
(b) the loan shall not be
utilised, either singly or in association with other person, for any of the activities
in which investment by persons resident outside India is prohibited, namely;
(i) the business of chit
fund, or
(ii) Nidhi Company, or
(iii) agricultural or
plantation activities or in real estate business, or construction of farm
houses; or
(iv) trading in Transferable
Development Rights (TDRs).
Explanation: For
the purpose of item (iii) of proviso, real estate business shall not include
development of townships, construction of residential/ commercial premises,
roads or bridges.
(c) the Reserve Bank's
directives on advances against shares/ securities /immovable property shall be
duly complied with;
(d) the loan amount shall
not be credited to Non-resident External (NRE)/[5][***]/Foreign
Currency Non-resident (FCNR)/Nonresident Non-repatriable (NRNR) account of the
borrower;
(e) the loan amount shall
not be remitted outside India;
(f) repayment of loan
shall be made from out of remittances from outside India through normal banking
channels or by debit to the Non-resident Ordinary (NRO)/Non-resident Special
Rupee (NRSR)/Non-resident Non-repatriable (NRNR)/Non-resident External
(NRE)/Foreign Currency Non-resident (FCNR) account of the borrower or out of
the sale proceeds of the shares or securities or immovable property against
which such loan was granted.
(C) [6][for any purpose as
per the loan policy laid down by the Board of Directors of the Authorised
Dealer:
Provided that:
(a) the loan shall not be
utilised either singly or in association with other person for
(i) the business of chit
fund, or
(ii) Nidhi Company, or
(iii) agricultural or
plantation activities or in real estate business or construction of farm
houses, or
(iv) trading in
Transferable Development Rights (TDRs), or
(v) investment in capital
market including margin trading and derivatives.
(b) the Reserve Bank's
directives on such advances shall be duly complied with;
(c) the loan amount shall
not be credited to NRE/FCNR(B) accounts;
(d) the loan amount shall
not be remitted outside India;
(e) repayment of loan
shall be made from out of remittances from outside India through normal banking
channels or by debit to NRE/FCNR(B)/NRO accounts.]
(D) [7][An Authorised Dealer
in India may grant Rupee loans to NRI employees of Indian companies for
acquiring shares of the companies under the Employees STock Option (ESOP)
Scheme subject to the following conditions:
(i) The ESOP Scheme
should be as per the policy approved by the bank's Board.
(ii) The loan amount
should not exceed 90% of the purchase price of the shares or Rupees 20 lakhs
per NRI employee, whichever is lower.
(iii) The rate of interest
and margin on such loans may be decided by the banks, subject to directives
issued by the Reserve Bank from time to time.
(iv) The amount shall be
paid directly to the company and should not be credited to the borrowers'
non-resident accounts in India.
(v) The loan amount would
have to be repaid by the borrower by way of inward remittances or by debit to
his/her NRO/NRE/FCNR(B) account.
(vi) The loans will be
included for reckoning capital market exposures and the bank will ensure
compliance with prudential limits, prescribed by the Reserve Bank from time to
time, for such exposure to capital market.]
Regulation - 8. Providing housing loan in rupees to a non-resident.
An authorised dealer
or a housing finance institution in India approved by the National Housing Bank
may provide housing loan to a non-resident Indian or a person of Indian origin
resident outside India, for acquisition of a residential accommodation in
India, subject to the following conditions, namely:
(a) the quantum of loans,
margin money and the period of repayment shall be at par with those applicable
to housing finance provided to a person resident in India;
(b) the loan amount shall
not be credited to Non-resident External (NRE) / Foreign Currency Non-resident
(FCNR)/Non-resident Non-repatriable (NRNR) account of the borrower;
(c) the loan shall be
fully secured by equitable mortgage of the property proposed to be acquired,
and if necessary, also by lien on the borrower's other assets in India;
(d) the instalment of
loan, interest and other charges, if any, shall be paid by the borrower by remittances
from outside India through normal banking channels or out of funds in his
Non-resident External (NRE)/Foreign Currency Non-resident(FCNR)/Non-resident
Non-repatriable (NRNR)/ Non-resident Ordinary
(NRO)/ Non-resident
Special Rupee (NRSR) account in India, or out of rental income derived from
renting out the property acquired by utilisation of the loan;
(e) the rate of interest
on the loan shall conform to the directives issued by the Reserve Bank or, as
the case may be, by the National Housing Bank.
Regulation - [7A.
A loan granted to a
non-resident by an authorised dealer, in accordance with Regulation 7 above,
may be repaid by any relative of the borrower in India by crediting the
borrower's loan account through the bank account of such relative.][8]
Regulation - [8ARupee Loans to NRI/PIO employees of Indian body corporate.
A body corporate
registered or incorporated in India may grant rupee loan to its employees who
is a non-resident Indian or a Person of Indian Origin, subject to the following
conditions, namely:
(i) The loan shall be
granted only for personal purposes including purchase of housing property in
India;
(ii) The loan shall be
granted in accordance with the lender's Staff Welfare Scheme/Staff Housing Loan
Scheme and other terms and conditions applicable to its staff resident in
India;
(iii) The lender shall
ensure that the loan amount is not used for the purposes specified in
sub-clauses (i) to (iv) of clause (1) and in clause (2) of Regulation 6;
(iv) The lender shall
credit the loan amount to the borrower's NRO Account in India or shall ensure
credit to such Account by specific indication on the payment instrument;
(v) It shall be a term of
the loan agreement that the repayment of loan shall be made by way of
remittance from outside India or from NRE/NRO/FCNR Account of the borrower; and
the lender shall not accept repayment made from any other source.] [9]
Regulation - [8B. Rupee loans to non-resident Indian by Resident.
A resident individual
may grant loan to a NRI relative by way of crossed cheque/electronic transfer:
Provided that:
(i) the loan is free of
interest and the minimum maturity of the loan is one year;
(ii) the loan amount
should be within the overall limit under the Liberalised Remittance Scheme per
financial year available for a resident individual. It would be the
responsibility of the lender to ensure that the amount of loan is within the
limits prescribed under Liberalised Remittance Scheme during the financial
year;
(iii) the loan shall be
utilised for meeting the borrower's personal requirements or for his own
business purposes in India;
(iv) the loan shall not be
utilised, either singly or in association with other person, for any of the
activities in which investment by persons resident outside India is prohibited,
namely:
(a) the business of chit
fund, or
(b) Nidhi Company, or
(c) agricultural or
plantation activities or in real estate business, or construction of farm
houses, or
(d) trading in
Transferable Development Rights (TDRs).
Explanation. For the
purpose of item (c) above, real estate business shall not include development
of townships, construction of residential/commercial premises, roads or
bridges.
(v) The loan amount
should be credited to the NRO a/c of the NRI/PIO. Credit of such loan amount
may be treated as an eligible credit to NRO a/c;
(vi) the loan amount shall
not be remitted outside India; and
(vii) repayment of loan
shall be made by way of inward remittances through normal banking channels or
by debit to the Non-resident Ordinary (NRO)/Non-resident External (NRE)/Foreign
Currency Non-resident (FCNR) account of the borrower or out of the sale
proceeds of the shares or securities or immovable property against which such
loan was granted.][10]
Regulation - 9.Continuance of rupee loan/Overdraft to resident who becomes a person resident outside India.
An authorised dealer
or, as the case may be, an authorised bank, may allow continuance of
loan/overdraft granted to a person resident in India who subsequently becomes a
person resident outside India, subject to following terms and conditions:
(a) the authorised dealer
or the authorised bank is satisfied, according to his/its commercial judgement,
about the reasons to continue the loan or overdraft;
(b) the period of loan or
overdraft shall not exceed the period originally fixed at the time of granting
the loan or overdraft;
(c) so long as the
borrower continues to remain a person resident outside India, the repayment
shall be made either by inward remittance from outside India through normal
banking channels or from the funds held in Non-resident External (NRE)/Foreign
Currency Non-resident(FCNR)/Non-resident Non-repatriable (NRNR)/ Non-resident
Ordinary (NRO)/ Non-resident Special Rupee (NRSR) account of the borrower.
Regulation - 10. Continuance of rupee loan in the event of change in the residential status of the lender.
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 non-resident, the repayment of the loan
by the resident borrower should be made by credit to the Non-resident Ordinary
(NRO) or Non-resident Special Rupee (NRSR) account of the lender maintained
with a bank in India, at the option of the lender.
Regulation - 11. Overdraft in rupee account maintained with authorised dealer in India by a bank outside India.
An authorised dealer
may permit a temporary overdraft, for value not exceeding Rs five hundred
lakhs, in rupee accounts maintained with him by his overseas branch or
correspondent or Head Office outside India, subject to such terms and
conditions as the Reserve Bank may direct from time to time.
Explanation: For the
purpose of calculating the ceiling of Rupees five hundred lakhs under this
Regulation, the aggregate amount of overdrafts permitted by the authorised
dealer to all his branches, correspondents and Head Office outside India
outstanding in the books of all his branches in India, shall be taken into
account.
[1]Inserted by the
Foreign Exchange Management (Borrowing and Lending in Rupees) (Amendment)
Regulations, 2012 vide Notification No. GSR895(E) Dated 25.09.2012 w.e.f. 16th
day of September 2011.
[2]Inserted by the
Foreign Exchange Management (Borrowing and Lending in rupees) (Amendment)
Regulation, 2009 vide Notification No. GSR107(E) dated 20.01.2009.
[3]Inserted by the
Foreign Exchange Management (Borrowing and Lending in Rupees) (Amendment)
Regulations, 2013 vide Notification No. GSR645(E) Dated 17.09.2013 w.e.f.
20.09.2013
[4]Substituted for the
title ?Loans in rupees to non-residents against security of
shares or immovable property in India? by Notification No.
GSR351(E) dated 25.03.2004.
[5]Deleted the words ?Nonresident
Ordinary (NRO)? by Notification No. FEMA 31/2000 dated 27.11.2000.
[6]Inserted by
Notification No. GSR351(E) dated 25.03.2004.
[7]Inserted by the
Foreign Exchange Management (Borrowing and Lending in Rupees) (Amendment)
Regulations, 2007 vide Notification No. GSR711(E) dated 18.09.2007 w.e.f.
August 22, 2007.
[8]Inserted by the
Foreign Exchange Management (Borrowing and Lending in Rupees) (Amendment)
Regulations, 2012 vide Notification No. GSR895(E) Dated 25.09.2012 w.e.f. 16th
day of September 2011.
[9]Inserted by
Notification No GSR754(E) dated 20.08.2002.
[10]Inserted by the
Foreign Exchange Management (Borrowing and Lending in Rupees) (Amendment)
Regulations, 2012 vide Notification No. GSR895(E) Dated 25.09.2012 w.e.f. 16th
day of September 2011.