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

NRI Director Can Provide Unsecured Loan to Indian Company under FEMA Without RBI Approval, Consult ECB Master Directions An individual inquired whether a Non-Resident Indian (NRI) director, also a shareholder, can provide an unsecured loan of USD 50,000 to an Indian private limited company without requiring Reserve Bank of India (RBI) approval under the Foreign Exchange Management Act (FEMA), 1999. A respondent advised consulting the Master Directions on External Commercial Borrowing, noting that such a loan can be made under the automatic route. The process involves applying to the RBI through an Authorized Dealer (AD) banker using Form 83 to obtain a Loan Requisition Number (LRN) and submitting Form ECB 2 monthly for loan receipt and disbursement details.