RBI issues the Foreign Exchange Management (Guarantees) Regulations, 2026

The Reserve Bank of India (RBI) has, vide press release dated January 06, 2026, issued the draft Foreign Exchange Management (Guarantees) Regulations, 2026 (Revised Regulations), to amend and supersede the extant Foreign Exchange Management (Guarantees) Regulations, 2000 (Extant Regulations). The updated guidelines have been issued with the intent of promoting ease of doing business.

The regulations are principle based and the guarantees fulfilling the principles laid down in the regulation have been permitted. The scope of guarantees under automatic route has been expanded, and in this backdrop, a comprehensive reporting of all guarantees (whether issued, modified or invoked) has been introduced by the RBI.

The key aspects under the Revised Regulations include, inter alia, the following:

1. Exemption under the Guarantee Regulations: Under the Revised Regulations, it has been provided that nothing contained therein shall apply to the following:

• • A guarantee undertaken by a branch of an authorised dealer bank (AD Bank) outside India or in an International Financial Services Centre, unless any of the other parties to the guarantee is a person resident in India.
  • An Irrevocable Payment Commitment (IPC) issued by an AD Bank in its capacity of a custodian bank, where the principal debtor is a registered Foreign Portfolio Investor and the creditor is an authorized central counterparty in India.
  • A guarantee given in accordance with the Foreign Exchange Management (Overseas Investment) Regulations, 2022.

2. Permission to act as a surety or a principal debtor: As per the Revised Regulations, a person resident in India may act as a surety or a principal debtor for a guarantee, subject to conditions that: 

• • The underlying transaction for which the guarantee is being given or arranged is not prohibited under Foreign Exchange Management Act, 1999 or the rules or regulations or directions issued thereunder; and
  • the surety and the principal debtor are eligible to lend to and borrow from each other, respectively, under the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, as amended from time to time. Provided that this clause shall not apply to a guarantee:
    • • given by an AD Bank and covered by a counter-guarantee or issued against 100% collateral in the form of a deposit, from a person resident outside India; or
      • given by an agent in India of a shipping or airline company incorporated outside India on behalf of such company in connection with its obligation or liability owed to any statutory or Government authority in India; or
      • where both the surety and the principal debtor are persons resident in India.

3. Reporting Requirements: The Revised Regulations provide for a comprehensive reporting mechanism and stipulate, inter alia, the following in relation to the guarantees covered therein:

• • The guarantees covered under the Guarantees Regulations shall be reported by: (a) the surety where he is a person resident in India; or (b) the principal debtor who has arranged the guarantee and where the surety is a person resident outside India; or (c) the creditor where the surety and the principal debtor both are persons resident outside India or where the creditor has arranged the guarantee.

• • The person having the obligation to report the guarantee shall report, (a) issuance of guarantee, (b) any subsequent change in guarantee terms, namely – guarantee amount, extension of period or pre-closure, and (c) invocation of guarantee, if any, in the format provided under these regulations.

• • The aforesaid reporting shall be made to an AD Bank on a quarterly basis within fifteen calendar days from the end of the respective quarter for onward submission to the RBI.

• • The AD Bank shall submit the returns received under this regulation to the RBI in the manner and format provided for this purpose within thirty calendar days from the end of the respective quarter.

For more details, kindly refer to the Revised Regulations by clicking on this link.