Personal Loan for NRIs : Types, Features, Eligibility, and Interest Rates

June 29, 2022

Most people in the country consider relocating abroad for higher education, better economic opportunities, or the desire to start a new life. Adapting to an entirely new living environment in a new country has its own challenges and obtaining financial aid when in an unknown country can give you hard times.

Indian Banks offer tailor-made financing solutions to NRIs. NRIs can obtain personal loans from Indian financial institutions to aid their financial necessities. However, the NRI individuals must meet specific eligibility requirements imposed by banks to avail such a loan.

If you are an NRI residing in a foreign nation, this blog is specially curated for you. We have tried our best to provide you with all the information regarding the personal loans for NRIs, eligibility criteria, the documentation process, and the RBI guidelines imposed on such loans.

Personal Loan for NRIs: Overview

In the financial world, a personal loan is one of the most popular financial instruments. The zero collateral loan acts as a safety net and helps you manage expenses without draining your savings.

The top Indian banks, such as HDFCBank, State Bank of India, Punjab National Bank, Tata Capital, Citibank, ICICI Bank, etc, offer personal loans to NRIs at attractive interest rates from 10.05% per annum. Further, these loan products come with transparent processing, minimal documentation, and quick disbursements, which make them the perfect tool for NRIs.

Financial institutions in the country provide secured as well as unsecured personal loans to NRIs. In contrast to other loans, this is a short-term loan with a maximum repayment term of five years. Following disbursement of the loan, the borrower may opt for equated monthly instalments, or he may prepay the loan as a lump sum amount.

Types of Personal Loans For NRIs

Personal loans for NRIs can broadly be classified into secured and unsecured loans. Most banks do not insist on collateral for loans to NRIs, however, some do.

Secured Personal Loan

Secured personal loans require the borrower to pledge collateral security against the loan. NRE/NRO term deposits, FCNR deposits, assets, shares, or any property owned by the borrower is accepted as collateral. Personal loans can also be obtained from a family member, guarantor, or co-applicant. Banks and lenders usually ask for collateral for a personal loan in case of high loan amounts, or if the applicant’s credit profile is not upto the mark

Unsecured Personal Loans

An unsecured personal loan is a zero-collateral loan where the borrower can obtain funds without pledging any collateral. The banks analyse the NRI repayment capacity before offering him an unsecured loan. The interest rates are usually high as there is a risk involved in an unsecured personal loan for NRIs.

Features of NRI Personal Loan

Interest Rates

Interest rates are primarily determined by the applicant’s credit history and repayment capacity. The ideal applicant can obtain a NRI personal loan at minimal interest rates. The exact interest rate varies from person to person based on certain external and internal factors. Some of the main factors that affect the NRI personal loan interest rates are the loan tenure and amount.

Collateral

Financial institutions usually offer zero collateral personal loans. But in the case of NRIs, if the lending institution is not satisfied with the borrower’s financial standing, they may demand collateral security against the loan. This is because the lender may view it as a credit risk, and will require some sort of guarantee against their investment.

Repayment Tenure

The repayment tenure is the time period offered by the lending institution to the borrower to repay the loan in equated monthly instalments along with interest payable. Financial institutions provide flexible repayment tenure for personal loans depending on the borrower’s creditworthiness. Usually, the term for NRI personal loans goes up to 5 years.

Preference of Currency

Financial institutions allow the borrower to choose the transaction currency during the application process. The loan will be disbursed to the borrower’s NRE/NRO bank account. This way the borrower can avoid the hassle of having to convert the amount into the currency of the country they reside in.

Co-applicant

A co-applicant is an individual who participates in the loan approval and underwriting process with the borrower. Their status may be viewed as secondary to that of a principal applicant. Banks usually prefer to have a co-applicant residing in India for NRI personal loans. Further, applying with a co-applicant can also improve your chances for loan approval.

Documents Required For NRI Personal Loans

Given below are the set of documents that an applicant will have to submit a personal loan for NRIs:

Application Form
  • A duly filled application form with the signature of the NRI applicant
  • Passport size photographs
  • Photocopy of passport and visa
Identity Proof
  • Aadhaar Card
  • PAN Card
  • Driving Licence
  • Voter ID
  • Passport
Address Proof
  • Aadhaar Card
  • PAN Card
  • Driving Licence
  • Voter ID
  • Passport
Income Proof
  • Both Indian and International bank statements for past 6 months
  • Salary slip or salary certificate (in english)
Employment Proof
  • Appointment letter
  • Job contract
  • HRs email ID or official email ID
  • Identity card/CDC for NRIs working in Middle East or employed in Merchant Navy

Note:

  • The documents mentioned above have to be submitted both by the applicant and co-applicant
  • A power of attorney must be attested or notarized locally if the NRI applicant is in India.
  • Consider a scenario in which the borrower is abroad when the loan application is submitted. An Indian Consulate of the NRI’s resident country must attest to the Power of Attorney in such cases.

Eligibility Criteria For NRI Personal Loan

An applicant will have to meet the below given eligibility criteria to obtain a personal loan for NRI in India:

Particulars Self-Employed Individuals Salaried Individuals
Age 21 years – 68 years 21 years – 60 years
Work Experience Minimum of 3 years in the current business Minimum 2 years of work experience

Minimum 1 year of experience in the current organization

NRI Personal Loan Interest Rates in India

The creditworthiness and repayment ability determine the interest rate on NRI personal loans. Interest rates on NRI personal loans start at10.00% per annum and are highly competitive.

How Can I Apply For NRI Personal Loans?

NRIs can apply for personal loans by visiting the bank’s nearest branch or the bank’s official website.

Offline Application

  • If the NRI individual is currently in India, the applicant or the co-applicant can personally visit the nearest bank branch.
  • Fill out the personal loan application form and furnish all the details and documents as required.
  • If the bank has a branch in the NRI’s residence city, they may consider visiting that branch, and complete all the formalities.

Online Application

  • Alternatively, you can simply go to the bank’s official website.
  • The applicant must sign in to the website, fill out the application form, and submit the documents.
  • The bank will approve and disburse the loan on successful verification of the documentation process.

Note: You may consider taking help from your financial advisor. If you plan on pledging collateral, your advisor may help you make the right decision.

RBI Guidelines on Personal Loans For NRIs

According to RBI guidelines, a non-resident Indian can get a personal loan from financial institutions and banks in India. The Ministry of Finance and Reserve Bank of India govern the lending and borrowing policies. Non-resident Indians are offered zero-collateral personal loans and personal loans against overdrafts in accordance with their credit worthiness.

As of 1st January 2016, the Master Direction allows authorised dealers in India to grant INR loans to NRIs against shares and other securities, or against immovable property as collateral. The following guidelines must be followed by NRIs seeking a personal loan:

  • NRIs must comply with the RBI’s directives on such loans and its directives on advances against shares, securities, and movable property; 
  • Repayment of loans should be either through inward remittances from abroad or through debits to the NRE/NRO/FCNR(B)/NRNR/NRSR accounts of the borrower and out-of-sale proceeds realized through securities offered for the loan. 
  • Furthermore, these loans can also be repaid by a relative (as defined under the Companies Act) of the borrower in India through an account-to-account transfer. 
  • According to the above-mentioned terms and conditions, an authorized dealer may grant loans to NRIs for any other purpose in compliance with the norms of the RBI.
  • The loan shall be repaid through remittance from outside India or debit to the NRE/FCNR(B)/NRO account.

Comparison Table of NRI Personal Loans Offered by Top Banks and NBFCs

The table given below depicts the comparison of personal loan for NRIs as offered by different banks and NBFCs in the country:

Bank Name Interest Rates
HDFC Bank 10.50% p.a. to 21.00% p.a.
State Bank of India 9.80% p.a. to 13.80% p.a.
ICICI Bank 10.50% p.a.
Axis Bank 10.25% p.a.
Kotak Mahindra Bank 10.99% p.a..
IndusInd Bank 10.49% p.a.
Tata Capital 10.99% p.a.
Bajaj Finserv 13.00% p.a.
IDFC First  10.49% p.a. to 25% p.a.

Things to Consider Before Applying For NRI Personal Loans

Given below are some of the things that an NRI applicant should keep in mind before applying for a personal loan:

  • Personal loans are usually availed for unprecedented financial needs. The interest rates on such loans are high in comparison to other loans.
  • It is suggested that you should explore all the possible alternatives before arriving at a decision.
  • If you have a positive credit history and a good relationship with the bank, there is a possibility that your loan may process faster.
  • It might be advantageous to take the loan in the currency of the country you are residing in, as you may save on FOREX charges. But on the other hand, you might have to pay an additional processing fee to the lending institution.
  • In the case of NRI loans, the banks require a co-applicant residing in India.
  • Read the fine print of the lending institution before making a decision.

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Frequently Asked Questions

Can I take a personal loan even if I am already paying EMIs for another loan?

Yes, an individual can avail of two loans simultaneously. Many lenders approve of taking multiple loans, but if the outstanding debt is high, they might not consider approving the loan.

Can I get a personal loan for NRI?

An NRI is permitted to avail personal loan from a bank in India subject to terms and conditions specified by RBI. Banks offer customised personal loans to NRIs so that they can meet their financial needs.

What maximum loan amount can I get through NRI personal Loan?

An NRI individual can avail of a personal loan of up to INR 10 lakhs. However, the lending institution decides the loan amount after evaluating the applicant’s creditworthiness.

What are the documents required for an NRI personal loan?

An NRI is required to submit a copy of his visa, a copy of his passport, address proof (Indian and abroad), income proof, identity proof, business proof (in case of a self-employed individual), employment proof, and property documents (if applicable).

Who can be a co-applicant for an NRI personal loan?

A co-applicant is an individual who participates in the loan approval procedure with the borrower. Their status may be viewed as secondary to that of a principal applicant. In case of an NRI personal loan, it is compulsory to have a co-applicant who is a close family member of the applicant and must reside in India.

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