Can you get loans against NRE Term Deposits?

If you have an NRE Term Deposit with any bank in India then you can get loans against that account. You can avail at least 85 per cent of your term deposit amount as loan.

The maximum limit of loan you can take is fixed by the Reserve Bank of India (RBI) at Rs 20 lakhs. However, there are certain limitations put forward by the RBI where you cannot use the loans taken from your term deposit account. The purposes for which you cannot use the loan include:

* Re-lending.

* To carry out investments on agricultural or plantation activities.

* Investment in real estate business.

If you want to carry on with some other investment requirement in India then you can take loan against your NRE fixed deposits. They can be used for investments on non-repatriable basis in certain specified areas as well as in buying flats and houses subject to some prerequisites.

Fine points on NRE deposits

You can maintain a NRE Term Deposit accounts for a period of 1 year to 3 years. However, you can close your term deposit NRE account prematurely if you need to do so. While closing, you should keep in mind that no interests will be payable if you close the account before one year of opening the account.

If you close the account after an year of opening your account then the interest rate either on the date of deposit or on the date of closure, whichever less is payable. The rate of interest payable, however, by no means will exceed the contracted rate.

Click here to read Can proceeds of foreign currency notes or travelers cheques be credited to NRE accounts?

In case, you return to India to stay for an uncertain period or to take up an employment, then the NRE account will either be re designated as resident account or the funds held in the account will be transferred to Resident Foreign Currency (RFC) account, if you are eligible to hold RFC account.

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