The interest rate for loans taken by NRIs significantly varies depending on the purpose of borrowing. When funds are intended for investment in stocks or commercial real estate, the interest imposed is generally higher compared to loans secured for employment-generating endeavors.
In a recent development, the Reserve Bank of India (RBI) has enacted a ban which restricts public and private sector banks from extending loans exceeding Rs 20 Lakh against NRI deposits. This regulatory measure is rooted in concerns that a substantial portion of such loans is being misappropriated for speculative ventures in the share market and the real estate sector.
These prudent initiatives by the apex bank are designed to direct bank credit toward more productive sectors, moving away from the retail sphere. As a consequence, we can expect a tightening of additional investment flows, particularly impacting commercial real estate and the capital markets. Furthermore, an increase in standard assets provisioning is likely to trigger an upward adjustment in retail lending rates.