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Taking loan from a foreign national may not be possible under automatic route


My uncle and aunt informally adopted me (my uncle is my father’s elder brother and his wife is my mother’s elder sister). I was around three when this happened. After about two-and-a-half years of living with them, my aunt delivered a son. I lived with them until I finished my professional education at the age of 24. My uncle and aunt used to introduce me as their elder son, but that has not translated into reality because they have not given me any share of their wealth. They have saved all of it for their real son. Is there any law for me to claim some percentage of their wealth?

—Name withheld on request

We understand that no formal and legal process was followed by your uncle and aunt for your adoption and we further assume that you are a Hindu and your uncle and aunt also follows/followed Hinduism. You may note that Indian citizens who are Hindus, Jains, Buddhists or Sikhs are allowed to adopt a child formally and the adoption is as per the Hindu Adoption and Maintenance Act, 1956.

To answer your query, if you wish to claim a share in their estate, you would be required to prove the fact of adoption (the burden of proof rests on the person who seeks to displace the natural succession by alleging an adoption), which would have to be valid under the Hindu Adoption and Maintenance Act (with or without a registered document) or any other custom or usage by virtue of which there can be a sanctity to the adoption, which in your case if not legally done, may not be possible.

Can a friend who is a citizen of another country offer me (an Indian citizen) a loan? A friend is willing to give me a 5 lakh loan to help me tide over my financial problems. But I am unsure if this complies with FEMA regulations.

—Name withheld on request

People resident in India may borrow, both in rupees or foreign currency; but conditions apply. In case of borrowing in INR from NRIs/PIOs, these terms and conditions need to be complied with…

* Borrowing shall be only on a non-repatriation basis.

* The amount of loan should be received either by inward remittance from outside India or by debit to the NRE/NRO/FCNR(B)/NRNR/NRSR account of the lender, maintained with an authorized dealer/bank in India.

* The period of loan shall not exceed three years.

* The rate of interest on the loan shall not be more than 2% above the bank rate prevailing on the date of taking the loan.

* The payment of interest and repayment of principal shall be made only to the NRO account of the lender.

The terms and conditions are prescribed under the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, for borrowing in foreign currency from NRIs/PIOs. However, a loan from a foreign national in favour of an Indian citizen under the automatic route may not be possible.

Aradhana Bhansali is partner, Rajani Associates.

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