Can an Indian Citizen borrow from Foreign National NRI

The Foreign Exchange Management Act of 1999 allows any individual or company to raise money through foreign nationals by way of loans and Foreign Direct Investment, also known as FDI. However, in the FDI process, there are some pre-requisites that need to be completed to acquire funds from outside India.

Can an Indian Citizen borrow from a Foreign National NRI?

Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000 (“FEMBLFER”) states provisions regarding how an Indian person or a Company can do borrowing in foreign exchange.   

What do you mean by a Resident of India?

According to FEMA, an individual will be considered a resident of India when they reside for more than one hundred eighty-two days in the preceding financial year. 

However, it shall not include an individual who has left India for his employment, carrying out his business outside of India, nor when a person comes to stay in India for his job or carrying his business

How to borrow money from a foreign national/NRI?

Indian companies and individuals can raise money or borrow through foreign nationals or NRIs, and such borrowing is subject to certain restrictions. The Reserve Bank of India and the Ministry of Finance are responsible for checking and regulating the provisions and standards for lending and borrowing between residents of India and Non-Resident Indians. Furthermore, timely notifications are also released by the Reserve Bank of India whenever necessary. 

It is important to note that raising money through borrowing can be done differently, like loans and foreign direct investment (FDI). 

What do you mean by Foreign Direct Investment?

In recent times, foreign direct investment has grown a lot. This growth results from tremendous investment in most developing countries from developed countries, a vast amount of corporate profits, rising stock market valuations, the ownership rules that are being liberalized around the world, low-interest rates, etc. FDI has been an excellent support to withstand the economic roadblocks and crisis in the country, furthermore boosting foreign national / NRI savings, which is why most countries seek to increase their FDI.

As mentioned above, certain pre-conditions need to be followed if an Indian resident wants to borrow money from a foreign national. Such pre-conditions are: 

  1. The borrowing can only take place based on the non-repatriation method. According to this method, foreign nationals can only invest through Non-Resident Ordinary accounts. 
  2. The borrower may only receive such loan amounts through inward remittance from outside India or from a Non-Resident External (NRE), Non-Resident Ordinary (NRO), Foreign Currency Non-Resident Account (FCNR), Non-Resident Non-Repatriable (NRNR), and Non-Resident Special Rupee (NRSR).
  3. The maturity period of such a loan should be at least one year.
  4. The whole borrowing has to be interest-free. 

Normally, the authority grants permission to authority dealers and also its branches to lend and borrow in foreign exchange subject to certain restrictions which are:

  1. The credit can be acquired from outside India from any of its branches or head offices or correspondent centre which is located outside India up to the furthest reaches of 100% of its unimpaired Tier I capital or USD 10 million, whichever is higher.
  2. The loan can be acquired from an Indian bank whose branch is located outside India with the only purpose of its normal course banking business outside India only.
  3. It can be acquired by a financial organization or any bank located outside of India, to give pre-shipment or post-shipment unfamiliar cash credit to its sent-out constituents. 

Liberalised Remittance Scheme (LRS)

There are various schemes that are introduced to facilitate foreign direct investment in an easy way to reduce roadblocks and increase the amount of FDI. For this purpose, one such scheme is the Liberalised Remittance Scheme (LRS). 

To facilitate foreign direct investment, this scheme was introduced on February 4, 2004, as a financial measure so that the resident individuals could remit funds abroad for permitted current or capital account transactions or a combination of both. Such a regulatory framework is changed whenever required to cope up with the changing world. All these changes are published through amendment notifications, where the ADs allow resident individuals to make remittance payments with a value of up to USD 250,000 per financial year.


According to the authorities, there are a lot of changes being made whenever there is a requirement. However, there are still a number of changes that need to be done timely to ease the whole process. This does not only increase FDI in the country, but it also stabilizes our Indian economy. 

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