I hold little MF investment through NRE a/c in India. I've heard that loan
products such as FAS (Finance against Security) is available to resident
Indians but not NRIs. Is that right? If not, what are my options?
Kaushik Ajmera

Expert, Sandeep Shanbhag answers:
Non Resident Indians (NRIs) are generally allowed to take a loan for various purposes such as buying a house, investing in business or even for education from banks and other lending institutions in India. However, there are some conditions enforced by the Reserve Bank of India upon such NRI borrowings. These conditions cast some obligations not only on the NRI borrower but also the Indian lender. The article examines these and other related issues.

Loans in Rupees to non-residents

An NRI may borrow a rupee loan

·  Against the security of shares or other securities held in his or her name.

·  Against the security of immovable property (other than agricultural or plantation property or farm house), held by him or her in accordance with Foriegn Exchange Management Act (FEMA) Regulations,

Provided that

·  The loan shall be utilised for meeting the borrower's personal requirements or for his own business purposes.

·  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.

        (b) Nidhi Company

        (c) Agricultural or plantation activities or in real estate business or construction of farm houses

        (d) Trading in Transferable Development Rights (TDRs).

Explanation - For the purpose of item (c) of proviso, real estate business shall not include development of townships, construction of residential/commercial premises, roads or bridges.

· Reserve Bank of India's (RBI) directives on advances against shares/securities/immovable property shall be duly complied with.

  · The loan amount shall not be credited to the NRE (Non resident eqauted Rupee) or FCNR (Foreign Currency Non Resident) account of the borrower.

  · The loan amount shall not be remitted outside India.

  · Repayment of loan shall be made from out of remittances from outside India through normal banking channels or by debit to the NRO (Non Resident Ordinary) /NRE (Non Resident External Rupee) /FCNR (Foreign Currency Non Resident) accounts of the borrow­er or out of the sale proceeds of the shares or securities or immovable property, against which such loan was granted.