I am a resident Indian. My college friend is an NRI in Kuwait with an NRE account. He wants to lend me ₹5–10 lakh for 3 years, and I will repay principal with interest. Is there a FEMA-compliant structure for this, and what account should be used for repayment?"
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FEMA compliant structure
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Yes, you can legally borrow the money, but it must be structured on a non-repatriation basis. The loan can originate from your friend’s NRE account, but the repayment of both principal and interest must be deposited into their NRO account. The maximum allowed tenure is 3 years, and the interest rate must not exceed 2% over the prevailing RBI bank rate.
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