Source: BS
Context:
The Reserve Bank of India (RBI) has issued new Foreign Exchange Management Regulations prohibiting resident Indians from issuing credit guarantees in favour of Non-Resident Indians (NRIs).
Key Provisions
- Resident Indians cannot issue credit guarantees for NRIs under FEMA regulations.
- Residents may act as:
- Surety, or
- Principal debtor,
only if: - The underlying transaction is permitted under foreign exchange law, and
- Both resident and non-resident parties are eligible to lend or borrow from each other under existing borrowing and lending rules.
Legal Framework
- Issued under the Foreign Exchange Management Act (FEMA).
- Aims to ensure:
- Compliance with cross-border capital flow regulations
- Prevention of unauthorised financial exposure and risk
