Borrowing and Lending Regulations

Borrowing and lending between Person Resident in India and Person resident outside India is governed by the regulations of Foreign Exchange Management Act 1999. In this article we have analysed permissibility of borrowing and lending by Individual who is a Person resident outside India and Person resident in India as per the regulations of Foreign Exchange Management Act 1999.

 a) Borrowing and Lending in INR

Lender	Borrower	Permitted Not permitted
Resident	NRI OCI (Relative)	Permitted within LRS limit of USD 250000 (equivalent amount in INR). The loan should be taken for at least one year and interest-free subject to other terms and conditions. (As per Regulation 7B(iii) of Borrowing & lending Regulation and LRS Master Direction)
Resident	NRI OCI (Non-Relative)	Not permitted (Capital account transaction which is not specifically permitted is prohibited)
NRI Relatives who are the OCI cardholder	Resident	Permitted (As per Regulation 6B(vi) of Borrowing and lending Regulation 2018)
Non NRI	Resident	Not permitted (Capital account transaction which is not specifically permitted is prohibited)

 b) Borrowing and lending in foreign exchange

Lender	Borrower	Permitted Not permitted
Resident	NRI (Relative)	Permitted within LRS limit of 250,000 USD subject to other terms and condition provided under LRS master direction (As per LRS Master direction)
Resident	NRI (Non-Relative)	Not permitted (Capital account transaction which is not specifically permitted is prohibited)
Any Person resident outside India who is a relative (Including NRI OCI)	Resident	Permitted maximum of 250,000 USD (As per Regulation 4B(v) of Borrowing and lending Regulation)
Person resident outside India who is not a relative	Resident	Not permitted (Capital account transaction which is not specifically permitted is prohibited)

Relative with reference to any individual means

i)  Spouse of the individual

ii)  Father

iii)   Mother

iv)   Son

v)  Sons wife

vi)  Daughter

vii)  Daughters husband

viii)  Brother and Sister

Continuation of loan in the event of change in the residential status of the lender borrower

a)In case a loan was granted by a resident individual to another resident individual and the lender subsequently becomes a non-resident, the repayment of the loan by the resident borrower should be made by credit to the NRO account or any other account of the lender maintained with a bank in India as specified by the Reserve Bank from time to time at the option of the lender.

b)In case a loan was granted by a NRI OCI Cardholder to a person resident in India in accordance with the provisions contained in these regulations and the lender subsequently becomes a resident the repayment of the loan may be made to the designated account of the lender maintained with a bank in India as specified by the Reserve Bank from time to time at the option of the lender.