NRI Loan Repayment by Resident Close Relatives Expanded
Current · Source: Reserve Bank of India · RBI/2011-12/183 · issued 16 Sep 2011 · ~2 min read
Quick answerRBI now allows resident close relatives to repay any rupee loan taken by an NRI from an authorised dealer, not just housing loans. Earlier, only housing loan repayments were permitted. This follows a committee recommendation to ease FEMA rules for individuals.
The rule, in the simplest words
Before this rule, only housing loans (loans to buy a house) given to NRIs (people living outside India) could be repaid by their close relatives living in India.
Now, any rupee loan (loan in Indian money) given by a bank to an NRI can be repaid by their close relative living in India.
A 'close relative' means a relative as defined in Section 6 of the Companies Act, 1956 (a list of family members like spouse, siblings, parents, etc.).
The repayment must be done by the relative putting money into the NRI's loan account from their own bank account.
This change started on September 16, 2011, and banks must update their rules to accept such repayments for all NRI rupee loans.
How it plays out — a real example
A forex & trade-finance officer in Mumbai receives a call from Priya, a resident close relative of an NRI borrower. Priya wants to repay her brother's personal loan (a rupee loan) taken from the bank. Before this rule, the officer could only accept repayment for housing loans, but now she can process the repayment for any rupee loan, making it easier for Priya to help her brother and reducing the bank's risk of default.
What changed
Previously, under FEMA Regulation 8(d), only housing loans taken by NRIs could be repaid by resident close relatives. Now, RBI has extended this permission to all rupee loans granted by authorised dealers to NRIs under Regulation 7 of FEMA 4/2000-RB. The change is effective from September 16, 2011, and formal amendments to the regulations are being issued separately.
What it means for you
Banks can now accept loan repayments from resident close relatives for any rupee loan extended to NRIs, not just housing loans. This simplifies compliance for lenders and reduces the need for case-by-case approvals. It also expands the pool of potential repayers, potentially lowering default risk on NRI loan portfolios.
What you must do
Update internal loan repayment policies to accept repayments from resident close relatives for all NRI rupee loans under Regulation 7.
Train branch staff on the expanded definition of 'relative' as per Section 6 of the Companies Act, 1956.
Ensure loan documentation captures the relationship between the NRI borrower and the resident relative making repayment.
Monitor for any separate amendment notification to FEMA 4/2000-RB and align systems accordingly.
Who it affects
Authorised dealers (banks) handling NRI rupee loans, NRI borrowers with rupee loans from Indian banks, Resident close relatives of NRIs who wish to repay loans
❓ Common questions
Regulatory timeline
Stated effective dateeffective from September 16, 2011
Decoded by BankPulse2026-06-18 23:30 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Does this circular apply to loans given by housing finance institutions?
The circular specifically mentions loans granted by an authorised dealer. Housing finance institutions are not covered under this expansion; the earlier housing loan provision for them remains unchanged.
What is the definition of 'close relative' under this circular?
The circular refers to 'relative as defined in Section 6 of the Companies Act, 1956'. Banks should refer to that definition for determining eligible resident relatives.
Are there any additional approvals needed for such repayments?
No, the circular grants general permission. However, banks must ensure compliance with other applicable laws and maintain proper documentation.
📜 Read the original circular — full text as issued by RBI
RBI/2011-12/183
A.P. (DIR Series) Circular No. 19
September 16, 2011
To
All Banks Authorised to Deal in Foreign Exchange
Madam / Sir,
Repayment of loans of Non-resident close relatives by residents
Attention of the AD banks is invited to Regulation 8 (d) of the FEMA Notification No.4/2000- RB dated May 3, 2000 viz. Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000, as amended from time to time, in terms of which the housing loan provided to a non-resident Indian or a person of Indian origin resident outside India by an authorised dealer or a housing finance institution in India approved by the National Housing Bank for acquisition of a residential accommodation in India, may be repaid by any relative of the borrower in India by crediting the borrower's loan account through the bank account of such relative (relative as defined in section 6 of the Companies Act, 1956). Thus, repayment of loan by close relative in respect of loan in rupees availed by NRI is restricted to housing loans only.
2. The Committee to review the facilities for individuals under the Foreign Exchange Management Act (FEMA), 1999 has in its Report recommended that resident individuals may be granted general permission to repay loans availed of from banks in Rupees in India by their NRI close relatives as defined under Section 6 of the Companies Act.
3. The extant provision has now been reviewed and it has been decided that where an authorised dealer in India has granted loan to a non-resident Indian in accordance with Regulation 7 of the Notification No. FEMA 4/2000-RB, ibid, such loans may also be repaid by resident close relative (relative as defined in Section 6 of the Companies Act, 1956), of the Non-Resident Indian by crediting the borrower's loan account through the bank account of such relative.
4. The necessary amendments to the Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000 are being issued separately.
5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
Yours faithfully,
(Meena Hemchandra)
Chief General Manager In-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/183 · issued 16 Sep 2011. The plain-English explanation above is BankPulse’s own independent summary.
Train branch staff on the expanded definition of 'relative' as per Section 6 of the Companies Act, 1956.
💻 IT / Systems
Monitor for any separate amendment notification to FEMA 4/2000-RB and align systems accordingly.
📜 Compliance
Update internal loan repayment policies to accept repayments from resident close relatives for all NRI rupee loans under Regulation 7.
Ensure loan documentation captures the relationship between the NRI borrower and the resident relative making repayment.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (Authorised dealers (banks) handling NRI rupee loans, NRI borrowers with rupee loans from Indian banks, Resident close relatives of NRIs who wish to repay loans), your first concrete step on “NRI Loan Repayment by Resident Close Relatives Expanded” is: “Update internal loan repayment policies to accept repayments from resident close relatives for all NRI rupee loans under Regulation 7.” (RBI issued this 16 Sep 2011).
Circular: RBI/2011-12/183 -- NRI Loan Repayment by Resident Close Relatives Expanded
Issued: 16 Sep 2011
Action required: Update internal loan repayment policies to accept repayments from resident close relatives for all NRI rupee loans under Regulation 7.
Action required: Train branch staff on the expanded definition of 'relative' as per Section 6 of the Companies Act, 1956.
Action required: Ensure loan documentation captures the relationship between the NRI borrower and the resident relative making repayment.
Action required: Monitor for any separate amendment notification to FEMA 4/2000-RB and align systems accordingly.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6715&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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