August 15, 2025

Hold on, Indians! The Reserve Bank of India (RBI) has whipped up fresh draft rules for foreign exchange guarantees. It says that an Indian citizen cannot act as a surety, principal debtor, or creditor for a guarantee involving current or capital account transactions without getting the RBI's green light. Imagine needing RBI’s permission before even promising someone’s payment! But wait, it gets spicier. A resident Indian can provide a guarantee only if it doesn’t break the FEMA Act, India's Foreign Exchange Management Act. So, no funny business here! And there’s more – authorised dealers are not allowed to issue a letter of comfort or letter of undertaking to back these guarantees. RBI means business! Now, if you are an Indian resident acting as a surety under these rules, you must report every guarantee you make. This includes if the amount changes or if the guarantee is invoked. And the clock is ticking – you have just seven days to report it from the date it happens. No exceptions! Don't delay, or else! Those who miss the deadline must pay a late submission fee within seven days, following RBI's rate and method instructions. But here's a relief: you can only pay late fees up to three years from your due reporting date. After that, RBI won't accept delayed reports or fees. These fresh RBI norms are clearly designed to keep a hawk's eye on foreign exchange guarantees by Indian residents. So, if you’re in this game, better get your papers ready and your timelines sharp!

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Tags: Rbi, Foreign exchange, Guarantee norms, Indian resident, Fema act, Reporting rules,