RBI issues draft regulations on forex guarantees

Mumbai: The Reserve Bank of India's (RBI) draft norms on foreign exchange guarantee say that an Indian citizen can't act as a surety, principal debtor, or creditor for a guarantee involving a current or capital account transaction without the central bank's permission.

A resident India can provide guarantee only in case where it is not in contravention of the FEMA Act. Authorised dealers have not been allowed to give a letter of comfort or a letter of undertaking for a guarantee.

An Indian resident acting as surety under these regulations shall report the guarantee including any change in the amount and invocation of such guarantee, if any, within seven days from the date of issuance/aforementioned change/invocation of guarantee.

Indians who do not meet the reporting requirement have to also pay a late submission fee within seven days at the rates and in the manner as per the directions issued by the RBI. Such a facility of late payment fee is available only up to a period of three years from the due date of such reporting.