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The Reserve Bank of India (RBI) has notified the Foreign Exchange Management (Guarantees) Regulations, 2026, replacing earlier rules from 2000. The new framework governs guarantees involving residents and non-residents, sets clear conditions for issuance, and introduces exemptions for authorized dealer banks and overseas investment commitments, enhancing transparency and compliance in forex transactions.
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The Reserve Bank of India (RBI) has formally issued the Foreign Exchange Management (Guarantees) Regulations, 2026, effective January 6, 2026. These regulations supersede the earlier FEMA (Guarantees) Regulations, 2000, and aim to modernize India’s foreign exchange governance framework under the Foreign Exchange Management Act, 1999.
Key Highlights
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Scope of regulation: Residents in India are restricted from entering guarantees involving non-residents unless specifically permitted under FEMA.
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Exemptions: Certain guarantees are allowed, including those issued by overseas or IFSC branches of authorized dealer banks, irrevocable payment commitments, and guarantees linked to overseas investment regulations.
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Conditions for residents: Indian residents may act as surety or principal debtor only if the underlying transaction is permitted under FEMA and borrowing/lending eligibility norms are satisfied.
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Reporting clarity: The regulations provide detailed guidance on how guarantees should be reported, amended, or terminated within reporting cycles.
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Objective: RBI’s move is aimed at strengthening compliance, reducing risks in cross-border transactions, and ensuring transparency in guarantee structures.
This regulatory update underscores RBI’s proactive approach to align India’s forex management with evolving global financial practices.
Sources: TaxGuru, ABCAUS Notification PDF
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