**Summary:**
This circular, A.P. DIR Series Circular No. 18, issued by the Reserve Bank of India (RBI) on October 04, 2024, addresses due diligence requirements for Category I Authorised Dealer (AD) banks regarding non-resident guarantees availed by persons resident in India. The RBI has observed instances of guarantees, including Standby Letters of Credit (SBLCs) and/or performance guarantees issued by non-residents favoring Indian residents, which are not in compliance with existing Foreign Exchange Management Act (FEMA) regulations. The circular directs AD Category-I banks to ensure that guarantee contracts advised by them to, or on behalf of, their resident constituents adhere to FEMA regulations. This directive is issued under Section 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999). Contact information for the Foreign Exchange Department, Central Office, RBI is provided: Address: 11th Floor, Central Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai – 400 001, India; Tel: 91-22-2260 3000; Fax: 91-22-2262 1038; Email: fedcoecbdrbi.org.in. The issuing officer is Dr. Aditya Gaiha, Chief General Manager-in-Charge.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking system and managing the country's currency.
FEMA regulations: Refers to the regulations under the Foreign Exchange Management Act, governing foreign exchange transactions in India.
Foreign Exchange Management Act, 1999: An Act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Category I Authorised Dealer Banks: Banks authorized by the Reserve Bank of India to deal in foreign exchange.
Standby Letters of Credit (SBLCs): A financial instrument used as a guarantee, issued by a bank on behalf of a client.
Mumbai, Maharashtra: City in India where the Central Office of the Reserve Bank of India is located.
Dr Aditya Gaiha: Chief General Manager-in-Charge, Foreign Exchange Department, Reserve Bank of India
Persons resident outside India: Individuals or entities residing outside of India, as defined by FEMA regulations.
भारतीय �रज़वर् ब�क
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2024-25/79
A.P. (DIR Series) Circular No. 18 October 04, 2024
To
All Category - I Authorised Dealer Banks
Madam / Sir,
Due diligence in relation to non-resident guarantees availed by persons
resident in India
The Reserve Bank of India (RBI) has come across instances of guarantees (including
Standby Letters of Credit [SBLCs] and / or performance guarantees) issued by
persons resident outside India, favouring persons resident in India, which are not
permitted under the extant FEMA regulations.
2. AD Category-I banks may ensure that guarantee contracts advised by them to, or
on behalf of, their resident constituents are in accordance with the FEMA regulations.
The contents of this circular may be brought to the notice of your constituents.
3. This direction is issued under Section 10(4) and 11(1) of the Foreign Exchange
Management Act, 1999 (42 of 1999).
Yours faithfully,
(Dr Aditya Gaiha)
Chief General Manager-in-Charge
�वदेशी मुद्रा �वभाग, केन्द्र�य कायार्लय, 11 वी मजं �ल, शह�द भगत �सहं माग,र् फोटर्, मुम्बई – 400 001, भारत
Foreign Exchange Department, Central Office, 11th Floor, Central Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai – 400 001, India
Tel: 91-22-2260 3000 Fax: 91-22-2262 1038 E-mail: fedcoecbd@rbi.org.in