The Reserve Bank of India has issued the Foreign Exchange Management (Guarantees) Regulations, 2026, effective from the date of Gazette publication on January 6, 2026.
Under the new rules, residents in India are barred from participating in guarantees involving non-residents unless explicitly permitted under FEMA or RBI regulations.
The definition of a guarantee has been broadened to include counter-guarantees and portfolios of liabilities. Certain exemptions apply, such as authorised dealer (AD) bank branches abroad, international financial centres (IFSCs), intermediary payment contracts by custodian banks for FPIs, and guarantees under FEMA Overseas Investment Rules.
Residents may act as surety or principal debtor provided the underlying transaction is FEMA-compliant and borrowing–lending eligibility criteria are met. For fully collateralised AD bank guarantees, foreign shipping and airline agents, or resident-to-resident guarantees, borrowing–lending norms are not required. Resident creditors can obtain guarantees subject to FEMA compliance if both debtor and surety are non-residents.
The regulations mandate quarterly reporting of guarantee issuance, changes, and invocation to AD banks within 15 days of quarter-end. AD banks must submit consolidated returns to RBI within 30 days. Late reporting is allowed on payment of a fee of ₹7,500 plus 0.025% of the amount per year of delay.
