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Advances against NRE/FCNR(B)  and NRO deposits can be granted for any purpose except the following.

   i)In the business of chit fund, or    
  (ii)  As nidhi company , or     
  (iii) Agricultural or plantation activities or real estate business; or construction of farm houses or
   (iv) Trading in transferable development rights (tdrs).     
      

For the purpose of sub-clause (iii) of clause (1), real estate business shall not include development of townships, construction of residential/ commercial premises, roads or bridges.

In the case of Loans against NRO Deposits, all the rules pertaining to Domestic Deposit apply except the above restriction on purpose of the Loan.

The Loan is treated as given to “self” in the following cases:

When a loan or an advance is granted against a FCNR (B) term deposit which stands in the name of :

• the borrower either singly or jointly
• one of the partners of a partnership firm and the advance is made to the said firm
• the proprietor of a proprietary concern and the advance is made to such a concern
• a ward whose guardian is competent to borrow on behalf of the ward, and where the advance is made to the guardian of the ward in such capacity

In case Third party is availing loan against the Deposit, the following points are to be noted.

• There should be no direct or indirect foreign exchange consideration to the Non-Resident depositor.
• The Non-Resident depositor should furnish an irrevocable undertaking to authorized dealer branch that he would not  withdraw the deposit during the period of loan/overdraft
• While processing the application, the usual norms and considerations apply as in the case of normal advances to trade/industry and satisfy themselves as to acceptability of purpose, genuiness of credit need of borrower and end-use of funds and not  solely guided by availability of security.                                                                                                                           
• The loan should be utilized for personal purpose or for carrying on business activities other than agricultural/plantation or real estate business or for re-lending.
• The period of the loan shall not exceed the unexpired period of maturity of the deposit accepted as security           

a) In the case of Loan to the Depositor himself/herself

b)In the case of Loan to third parties.

When Loans against Deposits are given to third parties, it is treated as commercial Loan/advance and Rate of Interest charged and also Margin is applicable as per the segment to which the Loan/advance belongs and/or as per credit rating of the borrower, wherever credit rating is applicable.