What changed
Previously, rupee loans under ESOP schemes were restricted to resident employees only. Now, AD Category-I banks can extend similar loans to NRI employees, following board-approved policies and specific conditions. The loan must be paid directly to the company, not credited to the borrower's non-resident account.
What it means for you
Banks can now tap into a new lending segment—NRI employees—for ESOP financing, potentially increasing fee income and customer stickiness. However, these loans count toward capital market exposure limits (max 40% of net worth), so banks must monitor aggregate exposure carefully. The repayment mechanism via inward remittances or designated accounts ensures forex compliance.
What you must do
- Update your bank's ESOP loan policy to include NRI employees, with board approval.
- Ensure loan disbursement is made directly to the company, not to the NRI's account.
- Track these loans under capital market exposure and stay within the 40% net worth ceiling.
- Verify that NRI borrowers repay through inward remittances or NRO/NRE/FCNR(B) accounts only.
- Train staff on FEMA compliance for NRI lending, especially documentation and reporting.
Who it affects
AD Category-I banks, NRI employees of Indian companies, Indian companies offering ESOP schemes, Bank compliance and credit departments
What is the maximum loan amount for an NRI employee under this ESOP scheme?
The loan cannot exceed 90% of the share purchase price or ₹20 lakh per NRI employee, whichever is lower.
How must the loan be repaid by the NRI employee?
Repayment must be through inward remittances from abroad or by debiting the borrower's NRO, NRE, or FCNR(B) account.
Do these loans affect the bank's capital market exposure limits?
Yes, these loans are included in the bank's capital market exposure, which must stay within the overall ceiling of 40% of net worth as prescribed by RBI.