All perfect praise be to Allah the Lord of the worlds. May his blessings and peace be upon our Prophet Mohammad, his family and noble companions.
Islam encourages doing good deeds and maintaining ties of kinship. Messenger of Allah (PBUH) said, "He who desires ample provisions and his life be prolonged, should maintain good ties with his blood relations." [Al-Bukhari and Muslim]
Maintaining ties of kinship depends on the ability of a Muslim. If he is solvent and can invite blood relatives to Ramadan Iftar banquet then this is good and Allah will reward him for that. If he is insolvent, then it is better not to burden himself by borrowing money to hold that banquet since kinship ties is to be maintained according to one`s ability. In addition, it suffices to meet and greet one`s relatives, even without inviting them to Ramadan Iftar or offer them gifts. However, if a person borrows money to host such a banquet then the following has to be considered:
If the money is obtained through taking a usurious loan, then this is forbidden because a Muslim is commanded to avoid usury, as it is one of the major sins. Jabir said: "God's Messenger cursed the one who accepted usury, the one who paid it, the one who recorded it, and the two witnesses to it, saying they were all alike." {Transmitted by Muslim}.
However, if he obtained the money through taking a Qard hassan ( A loan extended on a goodwill basis, mainly for welfare purposes. The borrower need only pay back the amount they borrowed, with no interest) or through Sharia-compliant Murabaha contract, then this is permissible. Yet, he has burdened himself especially if he is insolvent.
Nevertheless, if this loan causes him to decrease spending on his dependents then it is forbidden. The proof of this is that `Abd Allah bin ‘Amr reported the Messenger of Allah (PBUH) as saying : "It is sufficient sin for a man that he neglects him whom he maintains." {Transmitted by Abu Dawud}. Similarly, if the Ramadan Iftar banquet is hosted out of self-glory and ostentation, then it is also forbidden. And Allah the Almighty knows best.