How NRIs can send money to family and businesses in India but one wrong step violates FEMA

Many NRIs don't realise they can give loans or make deposits with family members, businesses, or companies back in India. But the RBI has very specific rules depending on the currency, the recipient, and the purpose. Get it wrong and you could violate FEMA regulations.

• Foreign currency loans
• INR loans
• Business deposits
• Bank-backed loans

NRIs and OCIs can give loans in foreign currency to close relatives in India on a repatriable basis. This means the money can be sent back out of India when repaid. But there are tight conditions.

1. Maximum loan amount: USD 250,000 (or equivalent in GBP, EUR, etc.)
2. Funds must come from remittances, NRE, or FCNR accounts - not from NRO accounts
3. Minimum loan tenure: 1 year
4. The loan must be completely interest-free - you cannot charge any interest

This route is only available to close relatives as defined under the Companies Act, not friends, acquaintances, or business partners.

NRIs can also lend in Indian Rupees to resident individuals on a non-repatriable basis. This means the repayment stays in India; you cannot move those funds back abroad.

Loan tenure
Maximum 3 years. Cannot be extended beyond this period under these rules.

Interest rate cap
Cannot exceed the RBI Repo Rate (Bank Rate) + 2%. Charged above this is a violation.

Fund sources
Remittances, NRO, NRE, or FCNR accounts; all are permitted for INR loans.

Repatriation
Non-repatriable: Loan repayments stay in India and cannot be sent overseas.

NRIs can place deposits with Indian proprietorships, partnerships, and private companies. But the rules differ sharply depending on who is accepting the money and how.

1. Deposits flow from and back to the NRI's NRO account in India - not NRE
2. Maximum deposit tenure: 3 years
3. Interest rate cannot exceed the ceiling set under the Companies (Acceptance of Deposits) Rules, 2014
4. Deposit funds cannot be used for relending, agriculture, plantation, real estate, or investing in other firms

Use NRO accounts, not NRE. Accepting deposits on a repatriable basis (via NRE) carries heavy regulatory restrictions and is generally not advisable.

Under the Companies Act, 2013, private companies have special rules for accepting deposits from NRIs depending on the relationship.

NRI directors and relatives
No upper limit. A private company can accept any amount from NRI directors and their close relatives, with no cap.

Members of the company
Up to 100% of paid-up share capital + free reserves + securities premium, provided funds are not borrowed.

Any other NRI
Strictly prohibited. Loans or deposits from NRIs who are not directors or members are not allowed.

The deposit cannot come from borrowed money. If the NRI has taken a personal loan abroad and tries to deposit it into the Indian company, that is a violation.

NRIs don't always have to transfer money directly. Banks in India can lend against the security of an NRI's fixed deposits, giving Indian residents access to funds without the NRI actually sending money.

• Loans against NRE or NRO fixed deposits can be given in rupees to the NRI or any other person in India
• Funds must be used in India for personal or business needs only, not real estate or agriculture
• NRE deposit loans can also be used by the NRI themselves to buy a residential flat or house in India
• The NRI pledging the deposit must receive no direct or indirect monetary benefit for enabling the loan to a third party
• Overseas branches of the same bank can also lend abroad against India-based deposits, if fully secured

Here's a plain-language summary of everything covered:

Foreign currency loan to relative
Max USD 250,000 · Interest-free · Min 1 year · Via NRE or FCNR · Repatriable

INR loan to resident individual
Max 3 years · Interest capped at Repo Rate + 2% · Via NRO/NRE/FCNR · Non-repatriable

Deposit with Indian business
Max 3 years · Interest capped by Companies Act · Via NRO only · Cannot fund real estate or relending

Bank loan against NRE/NRO FD
Loan in rupees to NRI or Indian resident · For personal/business use in India · NRI gets no monetary benefit for pledging
Always consult a FEMA-qualified advisor before proceeding. Violations can result in penalties up to 3x the amount involved.