Master Direction – Borrowing and Lending transactions in Indian Rupee between Persons Resident in India and Non-Resident Indians/ Persons of Indian Origin (Updated as on September 08, 2026)
UR
- Applies toAll regulated entities
- StatusIn force
- IssuedJan 04, 2016
- Amendmentsnone tracked
- Length37 points in 4 sections · 4 min read
The four dates on this rule
- PublishedJan 04, 2016The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyNot statedNot stated separately in this document. Read the rule itself before you assume a start date.
- Time to get readyNot statedCannot be worked out until the day it starts to apply is known.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Must know
1. Loan against shares or property
A bank may lend an NRI rupees against shares, securities or property, except farmland, plantation land or a farm house.
2. No investing where barred
The loan cannot fund any activity closed to foreign investment.
3. Loan money stays in India
The loan amount cannot be sent out of India or paid into the borrower's NRE, FCNR(B) or NRNR account.
4. Repayment sources for the loan
The NRI repays from abroad, from a non-resident account, or by selling the pledged shares.
5. General loans need board policy
A bank may lend an NRI rupees for other purposes too, under its own board-approved policy.
6. Not for capital market bets
This kind of loan cannot fund capital-market investing, margin trading or derivatives.
7. 90% or 20-lakh limit
The ESOP loan cannot exceed 90 per cent of the purchase price or 20 lakhs per employee, whichever is lower.
BankPulse example. An NRI employee's shares cost 30 lakh rupees. 90 per cent of that is 27 lakh rupees. That is more than 20 lakh, so the bank lends only 20 lakh, the lower figure.
8. Money paid to company
The loan money goes straight to the company, never into the employee's own account.
9. Housing loan matches resident terms
An NRI's or PIO's housing loan gets the same amount, margin and repayment period as a resident's.
10. Not into NRE, FCNR(B), NRNR
This housing loan cannot be paid into the borrower's NRE, FCNR(B) or NRNR account.
11. Must be mortgage-secured
The lender must secure the loan with a mortgage on the property, and other assets if needed.
12. Only for personal purposes
A company may lend its NRI or PIO staff rupees only for personal needs, including buying a home in India.
13. Credited to the NRO account
The company must pay the loan into the employee's NRO account.
14. Only two repayment routes
The employee may repay only from abroad or from their own NRE, NRO or FCNR(B) account.
15. Interest free one year minimum
A resident may lend an NRI relative rupees only interest-free, for at least one year.
16. Capped by yearly LRS limit
The lender's yearly LRS remittance limit also caps how much they can lend this way.
17. Credited to NRO only
The loan must be paid into the NRI's NRO account, not sent abroad.
18. Sends dues to lender's NRO
If the lender moves abroad instead, the resident borrower must pay into the lender's NRO account.
19. Overdraft for overseas offices, correspondents
A bank may allow its branches, correspondents or Head Office abroad a temporary rupee overdraft up to five hundred lakhs.
20. Five hundred lakh counted together
This ceiling of five hundred lakhs adds up overdrafts across every branch, correspondent and head office abroad.
BankPulse example. A bank gives overdrafts to its own branch, its correspondent and its Head Office abroad. Together these add up to six hundred lakh. RBI's ceiling here is five hundred lakh, counted across all three together. So the bank is over the ceiling, even though no single office alone holds five hundred lakh.
Background
1. Who the rulebook addresses
RBI addresses this rulebook to all Authorised Dealer Category-I banks and Authorised Banks.
2. Follows a 2000 FEMA rule
This rulebook comes from a 1999 law and a year-2000 regulation on rupee borrowing.
3. Compiles years of RBI orders
RBI has gathered years of separate orders into this one rulebook.
4. Uses FEMA's own definitions
This rule uses FEMA's own definitions of resident and non-resident.
5. NRNR/NRSR deposits stopped 2002
From April 01, 2002, no deposit, new or renewed, can be accepted under the NRNR or NRSR schemes.
6. Applies even when shared
This rule still applies even if the NRI uses the loan together with someone else.
7. Follows RBI's other lending rules
The bank must also follow RBI's separate rules on loans against shares or property.
8. A relative may repay instead
A relative in India may also repay this loan, by transfer between accounts.
9. ESOP lending needs board policy
A loan to buy ESOP shares must follow the bank's board policy and RBI's capital-market norms.
10. Interest set by bank
Banks set the interest rate and margin themselves, within RBI's own directives.
11. ESOP loan repayment routes
The employee repays from abroad or from their own non-resident account.
12. Interest follows RBI or NHB
The interest rate must follow whatever RBI or the National Housing Bank directs.
13. Follows the staff loan scheme
The loan must follow the company's own staff loan scheme, the same as for resident staff.
14. Written into the agreement
The loan agreement itself must spell out this repayment rule.
15. How the NRI relative repays
The NRI relative repays from abroad, from their NRO, NRE or FCNR(B) account, or from sale proceeds of the security.
16. Loan may reach maturity
If the borrower moves abroad, the bank may let the loan run to its original maturity.
17. Then repaid from abroad
After that move, repayment must come from abroad or the borrower's own non-resident account.