The Reserve Bank of India has issued the Foreign Exchange Management (Guarantees) Regulations, 2026, creating a comprehensive framework for guarantees involving persons resident outside India. The new rules apply to Authorised Dealer Category-I banks and update reporting, compliance, and operational requirements under the Foreign Exchange Management Act, 1999.
New Regulatory Framework
The regulations set out the rules for guarantees linked to cross-border transactions and foreign counterparties. They cover guarantees issued, modified, or invoked by authorised dealer banks. The RBI has asked banks to follow the new framework while facilitating such guarantees and to comply with related directions issued by its Department of Regulation.
Reporting Requirements
The regulations require comprehensive reporting of all relevant guarantees in the prescribed format. The exact manner and format for submitting these returns will be notified separately. This move is intended to improve monitoring of foreign exchange-related guarantee transactions and strengthen regulatory oversight.
Changes to Existing Directions
With the new regulations in force, earlier A.P. (DIR Series) circulars listed in the annexure have been superseded. The RBI has also discontinued quarterly reporting on guarantees for Trade Credit from the quarter ending March 2026. In addition, guarantee-related provisions in several Master Directions have been amended, including those on External Commercial Borrowings, Trade Credits, Export and Import of Goods and Services, and Reporting under FEMA, 1999.
Implications for Banks and Customers
Authorised dealer banks have been advised to inform their customers about the revised rules. The changes are expected to streamline compliance, reduce duplication in reporting, and align guarantee-related transactions with the updated foreign exchange regulatory framework.
Last Modified: April 25, 2026