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TaxTMI 
Master Direction – Borrowing and Lending transactions in Indian Rupee between Persons Resident in India and Non-Resident Indians/ Persons of Indian Origin (Updated as on February 16, 2026)
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....lations, Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1999. These directions lay down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/constituents with a view to implementing the regulations framed. 3. Instructions issued in respect of aforesaid transactions have been compiled in this Master Direction as also instructions regarding overdraft in INR account maintained by a bank outside India with an authorised dealer in India since the latter set of instructions are also part of aforesaid Regulations. The list of underlying notifications/ circulars which form the basis of this Master Direction is furnished in the Appendix. Reporting instructions can be found in Master Direction on reporting (Master Direction No. 18 dated January 01, 2016) 4. It may be noted that, whenever necessary, Reserve Bank shall issue directions to Authorised Persons through A.P. (DIR Series) Circulars in regard to any change in the Regulations or the manner in which relative transactions are to be conducted by the Authorised Persons with their cu....
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.... them respectively in Foreign Exchange Management (Deposits) Regulations, 2000 notified vide Notification No. FEMA 5/2000-RB dated May 03, 2000. 1.2 The terms 'Housing finance institution' and National Housing Bank' shall have the meanings assigned to them in the National Housing Bank Act, 1987. 1.3 The term 'Liberalised Remittance Scheme' means the scheme formulated in terms of circular A.P. (DIR Series) Circular No. 64 dated February 4, 2004 and as amended from time to time. 1.4 The terms 'Person Resident in India' and 'Person Resident outside India' shall have the same meanings as assigned to them in Sections 2(v) and 2(w) of the Foreign Exchange Management Act, 1999 (FEMA). 1.5 'Relative' means a 'relative' as defined under the Companies Act, 1956/ 2013: Act of 1956 Act of 2013 U/s 6: MEANING OF "RELATIVE" A person shall be deemed to be a relative of another, if, and only if, (a) they are members of a Hindu undivided family ; or (b) they are husband and wife ; or (c) the one is related to the other in the manner indicated in Schedule IA. U/s 2(77) ''relative'', with reference to any person, means anyone who is related ....
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....€¢ The directives of RBI on such loans and directives on advances against shares/securities/immovable property shall be duly complied with; • The repayment of loan should be either by inward remittance from outside India or by debit to NRE/NRO/FCNR(B)/NRNR/NRSR account of the borrower and/or out of sale proceeds realised through securities offered for the loans. Further, these loans can also be repaid by any relative (as defined under Companies Act) of the borrower in India through account to account transfer; • Subject to aforesaid terms and conditions and with additional requirements like compliance with applicable prudential norms of the RBI, authorised dealer may also grant INR loans to NRI for any other purpose provided it is as per the board approval policy of the authorised dealer and loan proceeds are not used for investment in capital market including margin trading and derivatives. Repayment of the loan shall happen by remittance from outside India or by debit to NRE/FCNR(B)/NRO account. 3.2 Lending for acquiring shares under the Employees Stock Option Plan: An Authorised Dealer in India may grant INR loan to NRI employees of Indian compan....
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....pee loan to its NRI/PIO employees subject to the following terms and conditions: • The loan shall be granted only for personal purposes including purchase of housing property in India; • The loan shall be granted in accordance with the lender's Staff Welfare Scheme/Staff Housing Loan Scheme and other terms and conditions applicable to its staff resident in India; • The lender shall ensure that the loan amount is not used for the purposes mentioned under 2.1.3 above; • The lender shall credit the loan amount to the borrower's NRO account or shall ensure credit to such account by specific indication on the payment instrument; • The repayment of loan shall be made only by way of remittance from outside India or from NRE/NRO/FCNR(B) account of the borrower and by no other source. This condition shall be inbuilt in the loan agreement. 6. INR Loans to NRI by Resident Individual A resident individual may grant INR loan to a NRI relative by way of crossed cheque/electronic transfer subject to the following terms and conditions: • The loan is free of interest and the minimum maturity of the loan is o....
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....t. APPENDIX List of notifications/ circulars which have been consolidated in this Master Direction Sl No Notification/ Circular Date Notification 1 FEMA Notification No.4/2000-RB May 03, 2000 2 FEMA Notification No.31/2000-RB November 27, 2000 3 FEMA Notification No.52/2002-RB March 01, 2002 4 FEMA Notification No.67/2002-RB August 20, 2002 5 FEMA Notification No.115/2004-RB March 25, 2004 6 FEMA Notification No.117/2004-RB May 25, 2004 7 FEMA Notification No.160/2007-RB May 18, 2007 8 FEMA Notification No.238/2012-RB September 25, 2012 9 FEMA Notification No.287/2013-RB September 17, 2013 10 FEMA Notification No. 3(R)(5)/2026-RB February 16, 2026 A.D (MA) / A.P.(DIR Series) Circular 1 A.D. (MA) Circular No. 11 May 16, 2000 2 A.P.(DIR Series) Circular No. 28 March 30, 2001 3 A.P.(DIR Series) Circular No. 28 March 04, 2002 4 A.P.(DIR Series) Circular No. 27 October 10, 2003 5 A.P.(DIR Series) Circular No. 69 February 12, 2004 6 A.P.(DIR Series) Circular No. 9 September 01, 2004 ....
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....s on repatriation basis then the percentage of NCDs issued to NRIs/PIOs to the total paid up value of all NCDs issued shall not exceed the ceiling prescribed for issue of equity shares/convertible debentures for foreign direct investment in India. Further, the funds towards borrowing should be received through inward remittance from outside India or by debit to NRE/FCNR (B) account of the investor maintained with an authorised dealer or an authorised bank in India; vii. If the borrowing is on non-repatriation basis from NRIs/PIOs then the amount of loan should be received either by inward remittance from outside India or by debit to NRE/NRO/FCNR(B)/NRNR/NRSR account of the investor maintained with an authorised dealer or an authorised bank in India. Payment of interest and repayment of principal shall be made only to the NRO account of the lender. 2.1.3. Restriction on use of borrowed funds: Use of proceeds of funds borrowed within the provisions given under 2.1.1 and 2.1.2 is subject to the following restrictions: • The proceeds shall be utilised only for the own business of the borrower other than what is mentioned at 2.1.2.i above. Additionally, co....