Foreign Exchange management (Guarantees) Regulations, 2000
FEMA 8/2000-RB, dated
3-5-2000 [GSR 391(E), dated 3-5-2000] - In exercise of the powers conferred by clause (j)
of sub-section (3) of section 6, sub-section (2) of section 47 of the Foreign
Exchange Management Act, 1999 (42 of 1999), the Reserve Bank makes the
following regulations, namely :—
(i) These regulations may be called the
Foreign Exchange Management (Guarantees) Regulations, 2000.
(ii) They shall come into force on 1st day of
June, 2000.
In these regulations, unless
the context requires otherwise,—
(i) ‘Act’ means the Foreign Exchange
Management Act, 1999 (42 of 1999);
(ii) ‘authorised dealer’ means a person
authorised as an authorised dealer under sub-section (1) of section 10 of the
Act;
(iii) the words and expressions used but not
defined in these regulations shall have the same meanings respectively assigned
to them in the Act.
Save as otherwise provided
in these regulations, or with the general or special permission of the Reserve
Bank, no person resident in India shall give a guarantee or surety in respect
of, or undertake a transaction, by whatever name called, which has the effect
of guaranteeing, a debt, obligation or other liability owed by a person
resident in India to, or incurred by, a person resident outside India.
Guarantees which
may be given by an authorised dealer.
(1) An authorised dealer may give a guarantee
in respect of any debt, obligation or other liability incurred by a person
resident in India and owed to a person resident outside India, in the following
cases, namely :—
where the debt, obligation
or other liability is incurred by the person resident in India,—
(i) as an exporter, on account of exports
from India;
(ii) as an importer, in respect of import on
deferred payment terms in accordance with the approval granted by the Reserve
Bank for import on such terms.
(2) An authorised dealer may give a guarantee
in respect of any debt, obligation or other liability incurred by a person
resident outside India, in the following cases, namely :—
(i) where such debt, obligation or
liability is owed to a person resident in India in connection with a bona
fide trade transaction :
Provided that the guarantee given
under this clause is covered by a counter-guarantee of a bank of international
repute resident abroad;
(ii) as a counter-guarantee to cover
guarantee issued by his branch or correspondent outside India, on behalf of
Indian exporter in cases where guarantees of only resident banks are
acceptable to overseas buyers.
(3) An authorised dealer may, in the ordinary
course of his business, give a guarantee in the following other cases, namely :
(i) on behalf of his customer or branch or
correspondent outside India in respect of missing or defective documents, or
authenticity of signatures;
(ii) in favour of organizations outside India
issuing travellers cheques stocked for sale in India by the authorised dealer
or by his constituents who are authorised persons.
Guarantees which may be given by persons other than an authorised dealer.
A person other than an authorised
dealer may give a guarantee in the following cases, namely :
(a)1[(i)] a person resident in India being
an exporting company may give a guarantee for performance of a project outside
India, or for availing of credit facilities, whether fund-based or non-fund
based, from a bank or a financial institution outside India in connection with
the execution of such project :
Provided that the previous approval
for undertaking the project has been duly obtained from the approving authority
in India;
1[(ii) a person resident in India being an exporter
company may give guarantee in lieu of Bid Bond Guarantee, for bidding for a
contract outside India without the approval of the Approving Authority provided
that the amount of such guarantee shall not exceed 5% of the contract value.]
Explanation - For the purpose of this
regulation, the “approving authority” means the authority referred to in
Regulation 18 of Foreign Exchange Management (Export of Goods and Services)
Regulations, 2000;
(b) a company in India promoting or setting
up outside India, a joint venture company or a wholly-owned subsidiary, may
give a guarantee to or on behalf of the latter in connection with its business:
Provided that the terms and
conditions stipulated in Foreign Exchange Management (Transfer and Issue of
Foreign Security) Regulations, 2000 for promoting or setting up such company or
subsidiary are continued to be complied with :
Provided further that the guarantee under
this clause may also be given by an authorised dealer in India;
(c) an agent in India of a shipping or
airline company incorporated outside India may give a guarantee on behalf of
such company in connection with its obligation or liability owed to any
statutory or Government authority in India.