Module: | MODULE A: INTERNATIONAL BANKING
Q35: Consider the following statements regarding the provisions for extending loans and monetary gifts to non-residents under the Liberalised Remittance Scheme:
Statement 1: A resident individual is permitted to lend money in Indian Rupees to a non-resident close relative, provided the loan is strictly interest-free and has a minimum maturity period of one year.
Statement 2: The loan amount extended to a non-resident relative must be credited directly to their domestic non-resident ordinary bank account and must remain within the overall 250,000 US Dollars limit of the resident lender.
Statement 3: Resident individuals can utilize the scheme to directly credit the domestic non-resident bank account of any foreign national as a financial gift, regardless of their relationship status.
Which of the statements given above are correct?
Statement 2: The loan amount extended to a non-resident relative must be credited directly to their domestic non-resident ordinary bank account and must remain within the overall 250,000 US Dollars limit of the resident lender.
Statement 3: Resident individuals can utilize the scheme to directly credit the domestic non-resident bank account of any foreign national as a financial gift, regardless of their relationship status.
Which of the statements given above are correct?
✅ Correct Answer: A
The correct answer is A. Statements 1 and 2 are correct, while Statement 3 is incorrect.
The remittance scheme allows resident Indians to support their family members abroad or in India, subject to strict structural conditions.
A resident individual can grant a Rupee loan to a non-resident close relative.
However, to prevent commercial lending disguised as family support, the central bank mandates that such loans must be completely free of interest and must have a minimum maturity period of one year.
This validates Statement 1. Furthermore, the loan cannot be remitted abroad in foreign currency; it must be credited to the borrower's domestic non-resident ordinary account within India, and the total value is subsumed under the resident lender's annual limit.
This makes Statement 2 accurate.
Statement 3 is incorrect.
While the scheme permits remitting foreign exchange abroad as a gift to any person, depositing Indian Rupees into a domestic non-resident account as a gift is a highly restricted transaction that is only legally permitted if the recipient is a strictly defined close relative, not just any unrelated foreign national.
The remittance scheme allows resident Indians to support their family members abroad or in India, subject to strict structural conditions.
A resident individual can grant a Rupee loan to a non-resident close relative.
However, to prevent commercial lending disguised as family support, the central bank mandates that such loans must be completely free of interest and must have a minimum maturity period of one year.
This validates Statement 1. Furthermore, the loan cannot be remitted abroad in foreign currency; it must be credited to the borrower's domestic non-resident ordinary account within India, and the total value is subsumed under the resident lender's annual limit.
This makes Statement 2 accurate.
Statement 3 is incorrect.
While the scheme permits remitting foreign exchange abroad as a gift to any person, depositing Indian Rupees into a domestic non-resident account as a gift is a highly restricted transaction that is only legally permitted if the recipient is a strictly defined close relative, not just any unrelated foreign national.