Reserve Bank of India (RBI) issues Foreign Exchange Management (Guarantees) Regulations, 2026 (Guarantees Regulations)

RBI issues the Guarantees Regulations ^[1] in supersession of erstwhile Foreign Exchange Management (Guarantees) Regulations, 2000, introducing a comprehensive and principle-based framework governing issuance, arrangement, modification and invocation of guarantees involving persons resident outside India.

The key changes are summarized below:

Clear definitions and role-based framework: The Guarantees Regulations adopt a structured approach by:

• Defining critical terms such as principal debtor (the person in favour of whom guarantee is given), surety (the person who gives the guarantee) and creditor (the person to whom Guarantee is given) and;
• Prescribing specific conditions applicable to residents when they act in different capacities (surety, principal debtor or creditor) in cross‑border guarantees.

Permitted and restricted guarantee arrangements: A resident in India cannot act as a principal debtor, surety or creditor in a cross‑border guarantee unless permitted under FEMA, these regulations or RBI’s general or special permission. Residents may act as surety or principal debtor only if:

• The underlying transaction is not prohibited under FEMA; and
• The surety and principal debtor comply with the extant External Commercial Borrowing (ECB) Regulations. However, eligibility conditions under ECB should not apply in the following cases:
  • guarantees issued by the Authorized Dealer (AD) banks backed by a counter‑guarantee or 100% collateral from a non‑resident;
  • guarantees issued by Indian agents of foreign shipping or airline companies to Indian authorities;
  • cases where both the surety and principal debtor are residents.

A resident creditor may arrange or receive a guarantee in its favour.
However, where both principal debtor and surety are non‑residents, the underlying transaction should be permissible under FEMA.

Guarantees outside purview of the Guarantees Regulations:

• Guarantees by overseas or International Financial Services Centre (IFSC) branches of AD banks, unless another party is a resident.
• Irrevocable Payment Commitments (IPCs) issued by custodian AD banks for obligations of FPIs to authorised central counterparties.
• Guarantees permitted under FEMA (Overseas Investment) Regulations, 2022.

New reporting and compliance framework: The Guarantees Regulations have introduced a statutory quarterly reporting requirement for issuance, modification and invocation of guarantees under the newly introduced form i.e. Form GRN, to be submitted to the designated AD bank within 15 calendar days of quarter end, with onward submission by the AD within 30 days to the RBI.

Late Submission Fee (LSF) for delayed reporting: A structured LSF applies to delayed reporting by residents comprising a fixed charge of INR 7,500 plus an additional amount linked to the value of the transaction and the length of delay, using the formula notified by RBI (0.025% × amount involved × period of delay, rounded up to the nearest hundred).

The Guarantee Regulations came into effect from the date of their publication in the Official Gazette, i.e., 6 January 2026.

^[1]Source: Notification No. FEMA 8(R)/2026 RB dated 6 January 2026 (Published on Official Gazette on 6 January 2026)