What changed
RBI has now clarified that AD Category-I banks may allow repayment of such loans to NRE/FCNR(B) accounts, subject to conditions, in response to representations.
What it means for you
This circular simplifies the repayment process for loans taken by residents from close relatives abroad, reducing compliance friction. Banks must verify the source of the original loan and the lender's eligibility before allowing the credit. It also clarifies that such credits are treated as eligible under existing deposit regulations.
What you must do
- Update internal guidelines to allow repayment credits to NRE/FCNR(B) accounts only when the original loan was via inward remittance or debit from such accounts.
- Verify lender eligibility to hold NRE/FCNR(B) accounts under FEMA 5/2000-RB before processing the credit.
- Train staff on the conditions specified in the circular, noting that the loan must comply with FEMA 3/2000-RB (including the USD 250,000 limit).
- Communicate this change to relevant constituents and ensure compliance with FEMA provisions.
Who it affects
AD Category-I banks, Resident individuals borrowing from close relatives abroad, Non-resident lenders with NRE/FCNR(B) accounts
Can a resident repay a loan from a close relative abroad by crediting the lender's NRE account directly?
Yes, AD Category-I banks may allow such credit if the original loan was received via inward remittance in foreign exchange or by debit to the lender's NRE/FCNR(B) account, and the lender is eligible to hold such accounts.
What is the maximum loan amount covered under this circular?
The loan must not exceed USD 250,000 or its equivalent, as per the existing regulations under FEMA 3/2000-RB.
Does this circular apply to all types of NRE/FCNR(B) accounts?
Yes, it applies to both NRE and FCNR(B) accounts, provided the lender meets eligibility criteria under FEMA 5/2000-RB.