RBI imposes restriction on obtaining credit enhancement in form of overseas guarantee

Foreign Exchange Management (Guarantees) (Third Amendment) Regulations, 2012 - Insertion of Regulation 3A

Notification [No. FEMA251/2012-RB]/GSR 917(E), Dated 6-12-2012

In exercise of the powers conferred by clause (j) of sub-section (3) of Section 6 and sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Guarantees) Regulations, 2000 (Notification No. FEMA 8/ 2000-RB dated May 3, 2000) (hereinafter referred to as 'the Principal Regulations'), namely:-

Short Title and Commencement

1. (a) These Regulations may be called the Foreign Exchange Management (Guarantees) (Third Amendment) Regulations, 2012.

(b) They shall be deemed to have come into force with effect from the 26th day of September, 2011@ .

Amendment of the Regulations

2. In the Principal Regulations, after Regulation 3, the following shall be inserted namely,—

"3A. Restriction on obtaining overseas guarantee

No corporate registered under the Companies Act, 1956 (1 of 1956) shall avail domestic rupee denominated structured obligations by obtaining credit enhancement in the form of guarantee by international banks, international financial institutions or joint venture partners, except with the prior approval of the Reserve Bank :

Provided howsoever that, a company resident in India engaged exclusively in development of infrastructure (infrastructure defined by the Reserve Bank from time to time in this regard) and infrastructure financial companies, as categorized by Reserve Bank from time to time, may obtain, without the prior approval of the Reserve Bank, credit enhancement in the form of guarantee from a person resident outside India for the domestic debts raised by such companies through issue of capital market instrument like bonds and debentures subject to satisfying the terms and conditions as may be stipulated by the Reserve Bank, from time to time, in this regard."