Loan by Resident Individual to a Close Relative (NRI/PIO)*
A resident individual can lend in Indian Rupees to a Close Relative who is an NRI/PIO, subject to the following conditions:
- ✅ Mode of Transfer: Loan must be made through crossed cheque or electronic transfer.
- ✅ Credit of Loan: Amount should be credited to the NRO (Non-Resident Ordinary) account of the NRI/PIO.
- 🚫 No outward remittance: The loan amount cannot be remitted outside India.
- ✅ Limit: Loan amount must be within the overall LRS limit of USD 250,000 per financial year.
- ✅ Interest: The loan should be interest-free.
- ✅ Tenure: Minimum maturity of the loan is 1 year.
- ✅ Purpose of Loan:
- For personal requirements of the NRI/PIO, or
- For own business purposes in India.
- 🚫 Prohibited Activities: The loan must not be used (alone or in combination with others) for investment in sectors where foreign investment is prohibited.
- ✅ Repayment: Can be made by:
- Inward remittances through normal banking channels, or
- Debit to NRO/NRE/FCNR accounts of the borrower.
Close Relative is defined as per the Companies Act, 2013 (includes spouse, parents, children, siblings, etc.).
Permissibility Matrix for Lending Under LRS
| Particulars | To Close Relatives (NRI/PIO) | To Others |
|---|---|---|
| Loan in Indian Rupees | ✅ Permitted (to NRO Account) | ❌ Not Permitted |
| Loan in Foreign Currency | ❌ Not Permitted | ❌ Not Permitted |
