Can a public trust take a loan from a foreign entity
Querist :
Anonymous
(Querist) 07 March 2025
This query is : Resolved
can a pubic trust which is going to be set up as a school, take a loan from a foreign source?
T. Kalaiselvan, Advocate
(Expert) 07 March 2025
A public trust in India can obtain a loan, but only with prior permission from the Charity Commissioner and under strict conditions, as per the Indian Trusts Act, which states that a trustee cannot borrow money for the trust without such sanction; the loan must be used solely for charitable purposes and should be taken to benefit the trust beneficiaries.
kavksatyanarayana
(Expert) 07 March 2025
Yes. The trustees of the trust shall approve a resolution to take a loan to attain the trust's objects. With a copy of such resolution, the trustees shall request the commissioner of charity/endowments, and after obtaining permission from the commissioner, the trust can take a loan.
SIVARAMAPRASAD KAPPAGANTU
(Expert) 10 March 2025
Obtention of permission from the Charity Commissioner is one part of it. It is mentioned that the Public Trust wishes to obtain a loan from a foreign source, which attracts FEMA guidelines. When a resident organisation wishes to borrow from a foreign source, many restrictions are there, starting right from the purpose of the loan, from whom borrowing can be made, the repayment period and rate of interest, etc. Therefore, the Public Trust may approach their Bank for their guidance, as ultimately the loan from foreign source shall have to be through their Bank.
