Nod for lending $200,000 to NRIs, PIOs in rupee terms

The Reserve Bank of India (RBI) today allowed Indians to lend up to $2 lakh in rupee in a fiscal to NRIs and PIOs, who are their close relatives, for personal purpose or business activities other than agriculture, real estate or relending business.

"The extant position has been reviewed and it has been decided to permit a resident individual to lend to a Non-Resident Indian (NRI)/Person of Indian Origin (PIO) close relative...," the central bank said in a notification.

It said residents could avail of the new rules, subject to the condition that "the loan amount should be within the overall limit under the Liberalised Remittance Scheme of $200,000 per financial year available for a resident individual."

Besides, the loan should be free of interest and with a minimum maturity of one year.

In addition, the loan should be utilised for meeting the borrower's personal requirements or for his own business purposes in India.

"The loan shall not be utilised, either singularly or in association with other person, for any of the activities in which investment by persons resident outside India is prohibited," the notification said.

The prohibited areas include the chit fund business, agricultural or plantation activities, real estate business, or construction of farm houses and trading in Transferable Development Rights (TDRs).

"For the purpose... Real estate business shall not include development of townships, construction of residential /commercial premises, roads or bridges," it added.

According to the notification, the loan amount is not allowed to be remitted outside India.

In another notification, the apex bank allowed resident individuals to gift up to $200,000 per fiscal in  rupees to their NRI close relatives.

The central bank's latest move comes a day after it liberalised the foreign exchange rules and allowed NRIs to hold joint account with Indian residents.