Loan IN USD from NRI Director to Indian Private Company

[Amar Kumar]

Dear fellow members

Can NRI director (who is also a shareholder) give unsecured loans with or without interest to an Indian private limited company? Amount involved USD 50,000.

Whether any RBI approval is required under the FEMA, 1999?

If yes what are the relevant provisions to be complied with?

[Sanketh Meri]

Please read Master directions on External Commercial Borrowing. Loan can be provided by share holder under automatic route. You will have to apply to RBI through your AD banker in Form 83 and get Loan Requisition No. Once you recieve LRN, every month you will have to submit Form ECB 2 detailing the receipt and disbursement of loan. Remember to check eligible end use for which such loan is provided

AI Summary

External commercial borrowing: NRI shareholder loans require registration via authorised dealer and monthly compliance reporting and end-use checks. NRI directors/shareholders may lend to an Indian private company under the automatic route of External Commercial Borrowing; the lender must apply via the authorised dealer bank in Form 83 to obtain a Loan Requisition Number, and thereafter the company must file Form ECB 2 monthly reporting receipt and disbursement while ensuring the loan meets eligible end-use requirements.