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FOREIGN EXCHANGE MANAGEMENT (BORROWING AND LENDING IN RUPEES)
REGULATIONS, 2000
Notification
No. 4 dated 3rd May 2000
GSR
387 (E), dated 3.5.2000: In exercise of the powers conferred by
clause (e) of sub-section (3) of section 6, sub-section (2) section 47 of the
Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India
makes the regulations relating to borrowing and lending in rupees between a
person resident in India and a person resident outside India as under, namely:
(1)
These Regulations may be called the Foreign Exchange Management
(Borrowing and Lending in Rupees) Regulations, 2000.
(2)
They shall come into force on 1st day of June 2000.
In
these Regulations, unless the context requires otherwise, -
(a)
�Act� means the Foreign Exchange Management Act, 1999 (42 of 1999);
(b)
�authorised dealer�, �authorised bank�, �Non-resident Indian (NRI)�,
�Person of Indian origin�, �Overseas Corporate Body (OCB)�, �NRE
account�, �NRO account �, �NRNR account�, �NRSR account�, and
�FCNR account� shall have the same meanings as assigned to them respectively
in Foreign Exchange Management (Deposits) Regulations, 2000 made by Reserve Bank
under clause (f) of sub-section (3) of section 6 of the Act;
(c)
�housing finance institution� and �National Housing Bank� shall
have the meaning assigned to them in the National Housing Bank Act, 1987 (53 of
1987);
(d)
�Transferable Development Rights (TDR)� shall have the meaning as
assigned to it in the Foreign Exchange Management (Permissible Capital Account
Transactions) Regulation, 2000.
(e)
The words and expressions not defined in these regulations but defined in
the Act shall have the same meanings respectively assigned to them in the Act.
Save
as otherwise provided in the Act, rules or regulation made thereunder, no person
resident in India shall borrow in rupees from, or lend in rupees to, a person
resident outside India:
Provided
that the Reserve Bank may, for sufficient reasons, permit a person resident in
India to borrow in rupees, from, or lend in rupees to, a person resident outside
India.
Explanation-For
the removal of doubts, it is clarified that use of Credit Card in India by a
person resident outside India shall not be deemed as borrowing or lending in
rupees.
A
person resident in India, not being a company incorporated in India, may borrow
in rupees on non-repatriation basis from a non-resident Indian or a person of
Indian origin resident outside India, subject to the following conditions:
(i)
the amount of loan shall be received by way of inward remittance from
outside India or out of Non-resident External/ Non-resident Ordinary (NRO)/
Foreign Currency Non-resident (FCNR)/ Non-resident Non-repatriable (NRNR)/
Non-resident Special Rupee (NRSR) account of the lender maintained with an
authorised dealer or an authorised bank in India,
(ii)
the period of loan shall not exceed three years;
(iii)
the rate of interest on the loan shall not exceed two percentage points
over the Bank rate prevailing on the date of availment of loan;
(iv)
where the loan is made out of funds held in Non-resident Special Rupee (NRSR)
account of the lender, payment of interest and repayment of loan shall be made
by credit to that account; and in other cases, payment of interest and repayment
of loan shall be made by credit to the lender�s Non-resident Ordinary (NRO) or
Non-resident Special Rupees (NRSR) account as desired by the lender; and
(v)
the amount borrowed shall not be allowed to be repatriated outside India.
(1)
Subject to the provisions of sub-regulations (2) and (3), a company
incorporated in India may borrow in rupees on repatriation or non-repatriation
basis from a non-resident Indian or a person of Indian origin resident outside
India or an overseas corporate body (OCB), by way of investment in
Non-convertible Debentures (NCDs) subject to the following conditions;
(i)
the issue of Non-convertible Debentures (NCDs) is made by public offer;
(ii)
the rate of interest on such Non-convertible Debentures (NCDs) does not
exceed the prime lending rate of the State Bank of India as on the date on which
the resolution approving the issue is passed in the borrowing company�s
General Body Meeting, plus 300 basis points;
(iii)
the period for redemption of such Non-convertible Debentures (NCDs) is
not be less than three years;
(iv)
the borrowing company does not and shall not carry on agricultural/
plantation/ real estate business/ Trading in Transferable Development Rights (TDRs)
or does not and shall not act as Nidhi or Chit Fund company;
(v)
the borrowing company files with the nearest office of the Reserve Bank,
not later than 30 days from the date-
(A) of receipt of remittance for
investment in Non-convertible Debentures (NCDs), full details of the remittances
received, namely; (a) a list containing names and addresses of Non-resident
Indians (NRIs)/ Overseas Corporate Bodies (OCBs) who have remitted funds for
investment in Non-convertible Debentures (NCDs) on repatriation and/or
non-repatriation basis, (b) amount and date of receipt of remittance and its
rupee equivalent; and (c) names and addresses of authorised dealers through whom
the remittance has been received;
(B)
of issue of Non-convertible Debentures (NCDs), full details of the investment,
namely; (a) a list containing names and addresses of Non-resident Indians (NRIs)/
Overseas Corporate Bodies (OCBs) and number of Non-convertible Debentures (NCDs)
issued to each of them on repatriation and/or non-repatriation basis and (b) a
certificate from the Company Secretary of the borrowing company that all
provisions of the Act, rules and regulations in regard to issue of
Non-convertible Debentures (NCDs) have been duly complied with.
(2)
The borrowing by issue of non-convertible debentures on repatriation
basis shall be subject to the following additional conditions, namely:
(a)
the percentage of Non-convertible Debentures (NCDs) issued to
Non-resident Indians (NRIs)/ Overseas Corporate Bodies (OCBs) to the total
paid-up value of each series of Non-convertible Debentures (NCDs) issued shall
not exceed the ceiling prescribed for issue of equity shares/ convertible
debentures for foreign direct investment in India as specified by the Reserve
Bank from time to time, under the relevant regulations, and
(b)
the amount of investment is received by remittance from outside India
through normal banking channels or by transfer of funds held in the investor�s
Non-resident External (NRE)/ Foreign Currency Non-resident (FCNR) account
maintained with an authorised dealer or an authorised bank in India;
(3)
The borrowing by issue of non-convertible debentures (NCDs) on
non-repatriation basis shall be subject to the following additional conditions,
namely:
(a)
the amount of investment is received either by remittance from outside
India through normal banking channels or by transfer of funds held in the
investor�s Non-resident External (NRE)/ Non-resident Ordinary (NRO)/ Foreign
Currency Non-resident (FCNR)/ Non-resident Non-repatriable (NRNR)/ Non-resident
Special Rupee (NRSR) account maintained with an authorised dealer or an
authorised bank in India.
(b)
where the investment is made out of funds held in Non-resident Special
Rupee (NRSR) account, the interest on such Non-convertible Debentures (NCDs)
shall also not be repatriable outside India, and the maturity proceeds and
interest on such debentures are credited only to the Non-resident Special Rupee
(NRSR) account of the investor.
No
person resident in India who has borrowed in rupees from a person resident
outside India:
(1)
shall use such borrowed funds for any purpose except in his own business
other than-
(i)
the business of chit fund, or
(ii)
as Nidhi Company, or
(iii)
agricultural or plantation activities or real estate business; or
construction of farm houses or
(iv)
trading in Transferable Development Rights (TDRs).
(2)
shall use such borrowed funds for any investment, whether by way of
capital or otherwise, in any company or partnership firm or proprietorship
concern or any entity, whether incorporated or not, or for relending.
Explanation:
For the purpose of sub-clause (iii) of clause (l), real estate
business shall not include development of townships, construction of
residential/ commercial premises, roads or bridges.
Subject
to the directions issued by the Reserve Bank from time to time in this regard,
an authorised dealer in India may grant loan to a non-resident Indian,
(A)
against the security of shares or other securities held in the name of
the borrower, or
(B)
against the security of immovable property (other than agricultural or
plantation property or farm house), held by him in accordance with the Foreign
Exchange Management (Acquisition and Transfer of Immovable Property in India)
Regulation, 2000:
Provided
that
(a)
the loan shall be utilised for meeting the borrower�s personal
requirements or for his own business purposes; and
(b)
the loan shall not be utilised, either singly or in association with
other person, for any of the activities in which investment by persons resident
outside India is prohibited, namely;
(i)
the business of chit fund, or
(ii) Nidhi
Company, or
(iii) agricultural or plantation
activities or in real estate business, or construction of farm houses; or
(iv) trading in Transferable
Development Rights (TDRs).
Explanation:
For the purpose of item (iii) of proviso, real estate business shall
not include development of townships, construction of residential/ commercial
premises, roads or bridges.
(c)
the Reserve Bank�s directives on advances against shares/ securities/
immovable property shall be duly complied with.
(d)
the loan amount shall not be credited to Non-resident External (NRE)/
Foreign Currency Non-resident (FCNR)/ Non-resident Non-repatriable (NRNR)
account of the borrower;
(e)
the loan amount shall not be remitted outside India;
(f)
repayment of loan shall be made from out of remittances from outside
India through normal banking channels or by debit to the Non-resident Ordinary (NRO)/
Non-resident Special Rupee (NRSR)/ Non-resident Non-repatriable (NRNR)/
Non-resident External (NRE)/ Foreign Currency Non-resident (FCNR) account of the
borrower or out of the sale proceeds of the shares or securities or immovable
property against which such loan was granted.
An
authorised dealer or a housing finance institution in India approved by the
National Housing Bank may provide housing loan to a Non-resident Indian or a
person of Indian origin resident outside India, for acquisition of a residential
accommodation in India, subject to the following conditions, namely:
(a)
the quantum of loans, margin money and the period of repayment shall be at par with those applicable to housing finance
provided to a person resident in India;
(b)
the loan amount shall not be credited to Non-resident External (NRE)/
Foreign Currency Non-resident (FCNR)/ Non-resident Non-repatriable (NRNR)
account of the borrower;
(c)
the loan shall be fully secured by equitable mortgage of the property
proposed to be acquired, and if necessary, also by lien on the borrower�s
other assets in India;
(d)
the instalment of loan, interest and other charges, if any, shall be paid
by the borrower by remittances from outside India through normal banking
channels or out of funds in his Non-resident External (NRE)/ Foreign Currency
Non-resident (FCNR)/ Non-resident Non-repatriable (NRNR)/ Non-resident Ordinary
(NRO)/ Non-resident Special Rupee (NRSR) account in India, or out of rental
income derived from renting out the property acquired by utilization of the
loan;
(e)
the rate of interest on the loan shall conform to the directives issued
by the Reserve Bank or, as the case may be, by the National Housing Bank.
An
authorised dealer or, as the case may be, an authorised bank, may allow
continuance of loan/ overdraft granted to a person resident in India who
subsequently becomes a person resident outside India, subject to following terms
and conditions:
(a)
the authorised dealer or the authorised bank is satisfied, according to
his/its commercial judgement, about the reason to continue the loan or
overdraft;
(b)
the period of loan or overdraft shall not exceed the period originally
fixed at the time of granting the loan or overdraft;
(c)
so loan as the borrower continues to remain a person resident outside
India, the repayment shall be made either by inward remittance from outside
India through normal banking channels or from the funds held in Non-resident
External (NRE)/ Foreign Currency Non-resident (FCNR)/ Non-resident Non-repatriable
(NRNR)/ Non-resident Ordinary (NRO)/ Non-resident Special Rupee (NRSR) account
of the borrower.
In
case a rupee loan was granted by a person resident in India to another person
resident in India and the lender subsequently becomes a non-resident, the
repayment of the loan by the resident borrower should be made by credit to the
Non-resident Ordinary (NRO) or Non-resident Social Rupee (NRSR) account of the
lender maintained with a bank in India, at the option of the lender.
An
authorised dealer may permit a temporary overdraft for value not exceeding Rs.
Five hundred lakhs, in rupee accounts maintained with him by his overseas branch
or correspondent
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