The Reserve Bank of India ("RBI") has identified instances where guarantees have been issued by persons residing outside India in favour of persons residing in India, which are not permitted under the Foreign Exchange Management Act, 1999 ("FEMA") and its related regulations. Consequently, RBI, vide circular dated October 4, 2024, has issued directions to Authorised Dealer Category-I banks to ensure that guarantee contracts advised by them to, or on behalf of, their resident constituents are in accordance with FEMA and the extant regulations.
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