Regulation 4 - Borrowing and Lending in Foreign Exchange by an Authorised dealer - Foreign Exchange Management (Borrowing or Lending In Foreign Exchange ) Regulations, 2000

4. Borrowing and Lending in Foreign Exchange by an Authorised dealer:- (1) An authorised dealer in India or his branch outside India may lend in foreign currency in the circumstances and subject to the conditions mentioned below, namely: (i) A branch outside India of an authorised dealer being a bank incorporated or constituted in India, may extend foreign currency loans in the normal course of its banking business outside India; (ii) An authorised dealer may grant loans to his constituents in India for meeting their foreign exchange requirements or for their rupee working capital requirements or capital expenditure subject to compliance with prudential norms, interest rate directives and guidelines, if any, issued by Reserve Bank in this regard; (iii) An authorised dealer may extend credit facilities to a wholly owned subsidiary abroad or a joint venture abroad of an Indian entity; Provided that not less than 51 per cent of equity in such subsidiary or joint venture is held by the Indian entity subject to compliance with the Foreign Exchange Management (Transfer and Issue of Foreign Security) Regulations, 2000; (iv) An authorised dealer may, in his commercial judgment and in compliance with the prudential norms, grant loans in foreign exchange to his constituent maintaining 1 (***) RFC Account, against the security of funds held in such account. (v) A branch outside India of an authorised dealer may extend foreign currency loans against the security of funds held in NRE/FCNR deposit accounts maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2000. (vi) Subject to the directions or guidelines issued by the Reserve Bank from time to time, an authorised dealer in India may extend foreign currency loans to another authorised dealer in India. 3 (vii). An authorized dealer may grant foreign currency loans in India against the security of funds held in FCNR (B) account to the account holder only, subject to the guidelines issued by the Reserve Bank in this regard. (2) An authorised dealer in India may borrow in foreign currency in the circumstances and subject to the conditions mentioned below, namely: (i) An authorised dealer may borrow from his Head Office or branch or correspondent outside India 6 [or any other entity as permitted by Reserve Bank ] upto 5 [hundred percent or such other limit as decided by the Reserve Bank, from time to time] of his unimpaired Tier I capital or US$ 10 million, whichever is more, subject to such conditions as the Reserve Bank may direct. Explanation: For the purpose of clause (i), the aggregate loans availed of by all branches in India of the authorised dealer from his Head Office, all branches and correspondents outside India, shall be reckoned. 4 (***) 4 (ii) A branch outside India of an authorised dealer being a bank incorporated or constituted in India, may borrow in foreign currency in the normal course of its banking business outside India, subject to the directions or guidelines issued by the Reserve Bank from time to time, and the Regulatory Authority of the country where the branch is located. 4 ( iii) An authorised dealer may borrow in foreign currency from a bank or a financial institution outside India, for the purpose of granting pre-shipment or post-shipment credit in foreign currency to his exporter constituent, subject to compliance with the guidelines issued by the Reserve Bank in this regard. ************************** Note: 1. The words EFFC Account or has been omitted vide Notification No. 026/2000 dated 14/8/2000 2. For the words 'fifteen per cent', the words 'twenty five per cent', has been substituted vide Notification No. 060/2002 dated 29/4/2002 . Further for the words 'twenty five per cent', the words 'fifty per cent', has been substituted vide Notification no. 182/2009 dated 13/1/2009 with effect from 15/10/2008 3. Has been added vide Notification No. 082/2003 10/1/2003 4. Clause (ii) has been deleted and the subsequent clauses has been renumbered as (ii) and (iii) respectively vide Notification No. 127/2005 dated 5/1/2005 , before it was read as, ii) An authorised dealer may borrow in foreign currency without limit from his head Office or branch or correspondent outside India for the purpose of replenishing his rupee resources, provided that - a) the funds borrowed are utilised for his own business operations and are not invested in call money or similar other markets; b) no repayment of the loan is made without the prior approval of Reserve Bank, which may be granted only if the authorised dealer has no borrowings outstanding either from Reserve Bank or other bank or financial institution in India and is clear of all money market borrowings for a period of at least four weeks prior to the week in which the repayment is made. 5. Substituted vide Notification No. FEMA. 286/2013-RB September 05, 2013 , before it was read as, 2 fifty per cent . 6. Inserted vide NOTIFICATION No. FEMA. 288/2013-RB September 26, 2013