Adhil ShettyBankBazaar.com
With the slowing of the economy and low growth in loan advances, banks are looking for various ways to increase the advances. One of the key focus areas for banks is NRIs. With the Modi government trying to go all the way to woo NRIs to use their capital and take part in India’s economy, banks have found easier to lend to NRIs. Moreover, the norms are slowly getting relaxed.Let’s look at the types of loan banks are willing to lend to NRIs.
Home Loan
As is the case with most expatriates, NRIs want to remain connected with their homeland. The best way to do it is by buying a home in India. Banks have understood this and the result is a plethora of schemes for NRIs for buying property in India.
Most banks define the age criteria for home loans available for NRIs. The age of the applicant should be between 21 and 60.
The way banks define residential status may differ, but usually, if you are abroad for a year or more, you are eligible for an NRI home loan. This is for salaried employees. If you are doing business, the requirement changes to 3 years.
The tenure usually is less than the tenure offered to Indian citizens. So, if the typical tenure for Indian citizens is 20 years, it may be just 10 years or 15 years for NRIs.
Just as in the case of home loan by resident Indians, banks also put minimum criteria on income of individuals applying for loan. An income above USD 40,000 should usually suffice but this varies as per the individual bank's policy.
As far as documentation is concerned, the borrower has to submit (apart from all the documents required for resident Indians) visa copies, passport copies, and foreign residential proof.
Home improvement loan
Home improvement loan is a scheme by which banks provide loan for repair, improvement, or renovation of home. NRIs are also eligible for this type of loan.
The criteria for home improvement loan are similar to other loan schemes (income, residential proof, loan to income ratio etc.). The only difference is that the amount may be capped by some banks. For example, a bank may cap the amount to Rs 3 lakh as per its policy.
The security in this case will be the hypothecation of the assets created by the renovation of home. For example, if the kitchen in remodelled with the loan, its assets will be hypothecated by the bank till the loan is paid.
Vehicle loan
NRIs can avail vehicle loan too from Indian banks, though the criteria widely differ. For example, some banks may allow NRIs to take vehicle loans but need a resident Indian as guarantor for the loan, while some banks may allow NRIs to become guarantor and avail the loan in the name of a resident Indian. In the second case, even though the NRI is included as a guarantor, he or she will pay the EMI. Remember that this is not the case in normal loan where a guarantor is the last resort for the banks for recovery, while the applicant has to pay the EMI.
In this case too, NRIs have to furnish required documentation like address proof, income certificates, passport details, visa details, and details of Indian guarantor.
The tenure of loan can vary as per the policy and can be anywhere between 3 to 7 years. The loan amount depends on the income and value of the car. Usually the LTV (loan to value) ratio is 80% to 100%. The loan to value ratio is the proportion of price of the car that can be availed through loan scheme.
Points to remember
In all cases, since the loan is given to NRIs, it is expected that the repayment will be done through normal banking channels using remittances from outside India. This can also be done by using NRE/NRO (Non-resident external, Non-resident ordinary) accounts. In a few cases, banks may allow close Indian relatives to pay the EMI but these cases are dealt at individual level. This can be ascertained at the designated branch of your bank.
Secondly, check the processing and other administrative fees associated with loan. These extra costs vary with banks and they can increase the real cost of loan. Compare with various banks, look at the overall cost and then decide.
Additionally, do take care of the difference in interest rates in India and your new home country. Usually, rates in India are much higher. You would be better off taking a loan abroad and buying the car in India with 100% down payment using your NRO/NRE account.
Finally, know the rules. Even though Governments have made transactions quite easier compared to what they were a few years back, it is always prudent to confirm the nuances with banks before you opt for loan.
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