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NRIs can invest in NCDs if The issue is available for NRIs by way of a public offer The company issuing NCD is not acting as a Nidhi or Chit fund company. The NCD has a maturity of 3 years or more. The interest rate on the NCD is not more than 3% over SBI’s prime lending rate. The borrowed funds are not to be used for agricultural/plantation or real estate business or for re-lending.
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Jigar Patel (NRI Investments and Taxation: A Small Guide for Big Gains)