What changed
Previously, loans against NRE/FCNR(B) fixed deposits were capped at Rs 100 lakh. The new circular removes this ceiling entirely for both rupee and foreign currency loans, whether granted to the depositor or a third party. The facility of premature withdrawal of these deposits is not available when a loan is availed.
What it means for you
Banks can now offer larger loans against NRE/FCNR deposits without a statutory upper limit, subject to usual margin norms. This expands lending opportunities for NRIs and third parties, but banks must ensure margin requirements are met, especially for FCNR deposits where margin is notionally calculated on rupee equivalent. Existing loans not conforming to these rules can continue until maturity but cannot be rolled over.
What you must do
- Update internal loan policies to remove the Rs 100 lakh ceiling on loans against NRE/FCNR(B) deposits.
- Ensure loan sanction letters clearly state that premature withdrawal of the deposit is not allowed when a loan is availed.
- Verify margin requirements as per existing regulations, including notional margin on FCNR deposits.
- Communicate the revised facility to NRI customers and branch staff handling NRE/FCNR accounts.
Who it affects
Category-I Authorised Dealer banks, Authorised banks handling NRE/FCNR accounts, NRI depositors with NRE/FCNR(B) accounts, Third parties seeking loans against NRE/FCNR deposits
Is there any upper limit now for loans against NRE/FCNR deposits?
No, the circular removes the earlier Rs 100 lakh ceiling. Loans can be granted up to the deposit balance, subject to usual margin requirements.
Can the depositor withdraw the deposit prematurely if a loan is taken against it?
No, the facility of premature withdrawal is not available when a loan is availed against the deposit. This condition must be communicated to the depositor at the time of sanction.
Does this circular apply to existing loans?
Existing loans that do not conform to the new instructions can continue for their existing term but cannot be rolled over or renewed.