Can NRI pledge shares?

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As per RBI guidelines, an NRI is allowed to pledge their shares with Indian banks, overseas banks, and Non-Banking Finance Companies (NBFC) for genuine business purposes. It is a general rule that the NRI shareholders are required to submit the declaration that the funds so availed as loan have been utilized for declared purposes only. An NRI can approach their banks for any guidance required in this regard.

The below table provides a summarized view on NRI pledging:

Shares can be pledged with	Purpose	Primary Condition for pledging
Authorised Dealer [AD] Bank in India	To avail loan for resident investee Indian company	Indian company should follow all SEBI disclosure norms
Overseas Bank	To avail loan for the non-resident investor or for the overseas group company	The loan should be availed from the overseas bank only and should be utilized for overseas business purposes only. Such funds should not be directly or indirectly be linked to any investments in India.
NBFC [AD bank has been delegated with the power to pledge NRI shareholding with NBFC]	To avail loan for the resident investee Indian company	Pledging of only listed equity shares on a recognized stock exchange is allowed.

Can NRI pledge shares?

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