Settlement deed in favour of a nri child

No. Mother can make a settlement deed in favour of her daughter, reserving life interest in the property till her life.

She can proceed to make a settlement of the property as desired. 

Yes, there are no such restrictions. by the way, what is the context of this query - are there other legal heirs?

An NRI/OCI is strictly prohibited from acquiring agricultural land, plantation property, or farmhouses in India by way of purchase or gift/settlement inter vivos (during the lifetime of the owner). Although a settlement deed retains a lifetime interest for the mother, the transfer of remainder title to the daughter takes effect during the mother’s lifetime. Under Indian law, this is categorized as a transfer inter vivos (gift/settlement), not inheritance. Therefore, registering a settlement deed for agricultural land in favor of an NRI without prior Reserve Bank of India (RBI) permission violates FEMA regulations.