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Reserve Bank of India (RBI) | Ministry of Finance
The Foreign Exchange Management (Guarantees) Regulations, 2026 (Foreign Exchange Management Act (FEMA) 8(R)/2026-RB), establish a modernized framework for cross-border financial guarantees. Superseding the 2000 notification, these regulations aim to streamline the issuance and reporting of guarantees involving non-residents while maintaining strict oversight to prevent unauthorized foreign exchange outflows.
The regulatory framework is built upon several critical compliance pillars:
Conditional Permissions: Indian residents can act as a surety or principal debtor only if the underlying transaction is permitted under FEMA and the parties are eligible under the 2018 Borrowing and Lending Regulations.
Exemptions for Global Flow: The regulations do not apply to guarantees issued by authorised dealer (AD) bank branches outside India or in International Financial Services Centres (IFSCs), provided no party involved is an Indian resident.
Institutionalized Reporting (Form GRN): A new standardized reporting tool, Form GRN, is introduced to track the entire lifecycle of a guarantee—from issuance (Parts A & B) to modification (Part C) and final invocation (Part D).
Strict Timelines & Penalties: Reporting must be completed quarterly through AD banks within 15 days of the quarter’s end. Late submissions trigger a mandatory fee calculated as ₹7,500 + 0.025% of the amount involved, multiplied by the delay in years.
What is ‘Form GRN’ and why is it mandatory for Indian residents? Form GRN is the statutory reporting document used to notify the RBI of any guarantee involving a non-resident. It ensures that the central bank can monitor the potential “contingent liabilities” of the country. For an Indian business, filing this form is essential because any guarantee issued prior to these regulations that undergoes a modification must now be reported as a “fresh issuance” under this new system.
Policy Relevance
This regulation is a strategic move to integrate Indian businesses into global value chains by simplifying how they back international obligations.
Ease of Doing Business: By clarifying the roles of surety and principal debtor, the RBI provides a more predictable legal environment for Indian firms seeking to expand globally or secure foreign credit.
Risk Mitigation: The strict reporting of “invocations” (when a guarantee is actually called upon) allows the RBI to track sudden spikes in foreign exchange demand, preventing potential shocks to the Indian Rupee.
IFSC Competitiveness: Exempting IFSC-based guarantees from these rules (where residents are not involved) strengthens GIFT City as a global financial hub that can compete with Singapore or Dubai.
Standardization: The requirement for mandatory fields like NIC Codes (2025) and LEI/PAN details ensures that India’s foreign exchange data is high-quality and interoperable with other digital governance initiatives.
Follow the full update here: RBI Foreign Exchange Management (Guarantees) Regulations, 2026