Many nationalized banks and NBFCS (Non-banking financial companies) offer home loans for NRIs who want to buy their own home in India. NRI home loan interest rate ranges from 6.90% to 10% per annum. NRIs need to repay the principal amount and interest rate charged by a bank or financial institution. NRI loan borrowers can use their NRI bank account to repay the loan. Common NRI home loan repayment methods are described below.
NRI home loan repayment methods
Lenders in India won’t accept EMI payments in a foreign currency unless the fund is routed through an NRI account. You can also pay EMI from your income earned in India in an NRO account. Following are methods NRIs can use to repay a home loan in India:
- Electronic Clearance System (ECS)
- National Automated Clearing House, or NACH
- Post Dated Checks (PDC)
- Standing Instructions
Electronic Clearance System
As the name suggests, an electronic clearance system is an electronic mode of payment for transactions that are repetitive. ECS is used by banks and credit unions for loan installment repayments, in insurance premium, and period investments in mutual funds, etc. Electronic clearance system allows lenders to charge an amount automatically from a bank account. NRI can repay their home loan through ECS. At the time of loan disbursement, borrowers need to fill ECS form and submit it to the payer bank.
Post-dated check (PDC) is an old method of loan repayment. The borrower needs to issue a check that can be cashed on a specified date of each month as agreed. For a loan availed for 5 years, you may have to issue 60 checks dated at intervals a month apart.
This method requires a lot of paperwork and EMI may be missed due to a mismatch of signatures.
National Automated Clearing House, or NACH
National Automated Clearing House (NACH) is a centralized payment clearing system that consolidates multiple ECS systems running across 82,000 branches in the country. It is a web-based solution implemented by National Payments Corporation of India (NPCI) for banks, NBFCs, corporates and government to facilitate interbank, high-volume, electronic transactions that are repetitive and periodic. NACH system can be used for the payments of loans.
NACH transactions are faster and take less than 24 hours. You have to sign a NACH mandate to grant permission for a loan repayment.
An NRI can give a standing instruction to his/ her bank to credit a certain sum of money on a particular date to the lender’s account. You can stop the payment at any time.
NACH or ECS are the most common NRI loan repayment methods because they are modern, efficient and well-managed. Once the first transaction is executed successfully, subsequent transactions would be done smoothly. Post-dated checks are allowed occasionally.
For NRIs living abroad, NACH is the best mode of a home loan repayment as it is less time-consuming and the most efficient way of payment.
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