RBI Issues Foreign Exchange Management Guarantees Regulations, 2026

RBI Notifies Foreign Exchange Management (Guarantees) Regulations, 2026

The Reserve Bank of India has notified the Foreign Exchange Management (Guarantees) Regulations, 2026 , creating a consolidated and transparent regulatory framework for guarantees involving persons resident outside India . The new regulations are intended to simplify procedures, strengthen oversight, and bring uniformity to cross-border guarantee transactions under the foreign exchange regime.

Coverage and Applicability

Through an official circular, the RBI has directed all Authorised Dealer (AD) Category-I banks to strictly comply with the 2026 Regulations while issuing, modifying, or invoking guarantees linked to non-residents. Banks are also required to ensure adherence to related instructions issued by the Department of Regulation.

The framework applies across the lifecycle of guarantees under the Foreign Exchange Management Act, 1999 (FEMA) , ensuring clarity and consistency in handling such transactions.

Reporting and Compliance Framework

A key feature of the new regulations is mandatory reporting . All guarantee-related transactions must now be reported by AD Category-I banks in a prescribed format. While the RBI will separately notify the detailed manner and periodicity of submission, it has emphasised that timely and accurate reporting is compulsory .

Banks have also been advised to proactively inform customers about the revised compliance requirements to avoid regulatory lapses.

Supersession of Earlier Circulars

With the notification of the 2026 Regulations, several earlier A.P. (DIR Series) circulars dealing with guarantees have been superseded. In a significant compliance relief, the RBI has discontinued quarterly reporting of guarantees issued for Trade Credit , effective from the quarter ending March 2026 . This change is expected to reduce operational burden while retaining effective regulatory supervision.

Alignment with RBI Master Directions

To ensure regulatory consistency, the RBI has amended guarantee-related provisions across multiple Master Directions , including those governing:

• External Commercial Borrowings (ECBs)

• Trade Credits

• Export and Import of Goods and Services

• Reporting obligations under FEMA

These amendments align existing instructions with the new regulatory framework, supporting orderly development and improved monitoring of India’s foreign exchange market.

Key Exam-Focused Points

• RBI has issued the Foreign Exchange Management (Guarantees) Regulations, 2026 .

• The regulations govern guarantees involving persons resident outside India .

• Quarterly reporting on Trade Credit guarantees is discontinued from March 2026 .

• AD Category-I banks must ensure mandatory reporting and customer awareness.

• The regulations are issued under the Foreign Exchange Management Act, 1999 .