Can an NRI Give a Loan in India?

An NRI can legally give a loan in India without prior RBI approval, provided the loan follows the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 framed under FEMA, 1999. The rule depends on who lends to whom: rupee loans to a resident individual are non-repatriable and are serviced only through the lender's NRO account; loans to Indian companies run through the ECB framework or debentures; residents lending back to an NRI relative are capped under the Liberalised Remittance Scheme. Cash is never permitted; funds must move through authorised banking channels (inward remittance or NRE/NRO/FCNR(B)/SNRR debit).

The governing instruments are FEMA, 1999 and the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, notified as Notification No. FEMA 3(R)/2018-RB dated 17 December 2018 and substantially amended by the First Amendment Regulations, 2026 with effect from 16 February 2026, read with the relevant RBI Master Direction and the LRS Master Direction. The 2018 Regulations replaced the FEMA (Borrowing or Lending in Rupees) Regulations, 2000, and the 2026 amendment deleted the RBI conditions on tenure and interest that survived until then. This page covers a Non-Resident Indian (NRI) or Overseas Citizen of India (OCI) giving a loan; for the reverse question of whether an NRI can get a loan in India, and for the wider picture of loans, banking and tax when you return to India, see the linked pages.

Under the FEM (Borrowing and Lending) Regulations, 2018, an NRI may lend in rupees to a resident individual on a non-repatriation basis, while other directions carry different routes and caps. The table below sets out the four common directions: NRI to resident individual (rupees), resident borrowing foreign currency from an NRI relative, NRI to Indian company, and resident lending to an NRI relative, with the permitted route, the cap, the tenure, the interest position and whether the money can be repatriated. All conditions in a row apply together.

The "maximum three years, interest up to 2% over the Bank Rate" figure that many websites still quote was an RBI condition carried in the Master Direction on rupee borrowing from NRIs (paragraph 2.1.1, which itself descended from the FEMA (Borrowing or Lending in Rupees) Regulations, 2000). It was deleted on 16 February 2026, when the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 substituted Regulation 6(B)(vi). Under the Regulations now in force, a rupee loan from an NRI (or from an OCI cardholder to a relative) to a resident individual must be received by inward remittance or by debit to the lender's NRE, NRO, FCNR(B) or SNRR account, must be on a non-repatriation basis, with interest and principal paid only into the lender's NRO account, and must not fund a restricted end-use; the Regulations set no ceiling on interest, no minimum or maximum tenure and no monetary cap.

Then and now:

The relative test for an OCI lender is met by the categories listed in Section 2(77) of the Companies Act, 2013 read with the Companies (Specification of Definitions Details) Rules, 2014. Getting the direction or the paperwork wrong is a foreign-exchange breach; see the FEMA penalties for getting your status or paperwork wrong before the money moves.

An NRI may lend rupees to any resident individual, and an OCI cardholder to a resident who is a relative under Section 2(77) of the Companies Act, 2013. The loan must meet conditions (a) to (c) together; (d) states the interest position.

a. It must be received by inward remittance from outside India or by debit to the lender's NRE, NRO, FCNR(B) or SNRR account. b. It must be on a non-repatriation basis: payment of interest and repayment of principal are made only to the lender's NRO account. c. It must not be used for a restricted end-use under Regulation 3A: chit funds, a Nidhi company, real-estate business or construction of farmhouses, agricultural or plantation activity (with the listed exceptions), trading in transferable development rights, transacting in securities, repaying a rupee loan taken for a restricted use or classified as a non-performing asset, or on-lending for any of these purposes. d. Interest, if charged, is income of the NRI taxable in India; the Regulations themselves set no ceiling on it and no minimum or maximum tenure.

What the Regulation says (Regulation 6(B)(vi), FEMA 3(R)/2018-RB, as substituted with effect from 16 February 2026): "A person resident in India being an individual may borrow in INR from an NRI or a relative who is an OCI cardholder for utilization in India, subject to the following terms and conditions: (a) The amount of loan should be received either by inward remittance from outside India or by debit to NRE / NRO / FCNR(B) / SNRR account of the lender; and (b) Borrowing shall be on non-repatriation basis i.e. payment of interest and repayment of principal shall be made only to the NRO account of the lender."

Because interest on this direction is no longer capped, any interest the resident pays to the NRI attracts Section 195 TDS, with the borrower filing Form 15CA and a chartered accountant certifying Form 15CB, exactly as on the company route. A loan documented as interest-free raises no interest and therefore no TDS.

An NRI cannot transfer money to an Indian company and call it a loan; company borrowing from a non-resident is treated as foreign debt and must use a prescribed route. In practice the company raises an External Commercial Borrowing (ECB) under Schedule I of the FEM (Borrowing and Lending) Regulations, 2018 as amended on 16 February 2026, under which any person resident outside India is a recognised lender, or the NRI subscribes to Non-Convertible Debentures (NCDs) the company issues under the FEM (Debt Instruments) Regulations, 2019. An ECB must carry a minimum average maturity of three years (one to three years for a manufacturing company within an outstanding limit of USD 150 million), stay within the higher of USD 1 billion or 300% of the company's net worth, be priced in line with prevailing market conditions, and be on arm's-length terms where the lender is a related party; the company must not use the funds for a restricted end-use (real-estate business, agriculture or plantation, a Nidhi or chit fund, trading in transferable development rights, transacting in securities) and must obtain a Loan Registration Number from the RBI through Form ECB before drawdown. The earlier route of NCDs by public offer under the rupee-borrowing Master Direction was deleted on 16 February 2026. An NRI director gets no exemption: the same ECB or debenture discipline applies (see the company row of the table above).

The repatriation basis follows the route. ECB is repatriable debt; debentures are repatriable or non-repatriable depending on the schedule of the debt-instrument regulations they are subscribed under. ECB is open to eligible borrowers only, which means a person resident in India, other than an individual, that is incorporated, established or registered under a Central or State Act; a resident individual cannot raise ECB. A foreign national who is not an NRI or OCI is also a person resident outside India and can lend to a company on the same ECB terms.

Using the wrong route is a FEMA contravention, and under Section 13 of FEMA, 1999 the penalty can run to three times the sum involved, or up to ₹2 lakh where the amount is not quantifiable, plus ₹5,000 per day of continuing default, with compounding available.

Loan money must move only through authorised banking channels (inward remittance from abroad, or debit to the NRI's NRE, NRO, FCNR(B) or SNRR account), and cash is never permitted under FEMA. For a rupee loan to a resident, interest and repayment of principal are credited to the NRI lender's NRO account, which fixes the loan as non-repatriable; the NRI can still repatriate up to USD 1 million per financial year from that NRO account, after tax and a CA certificate, under the Remittance of Assets rules. NRE and FCNR(B) balances are fully repatriable, so the source account, and the mandated NRO repayment route, decide whether the money can ever leave India again.

The mechanics of each account, and which one to open, are covered in full at how your NRE, NRO and FCNR accounts work.