RBI Allows non-residents to provide non-fund based guarantee
The Reserve Bank of India has allowed non-residents to provide guarantee for non-fund based activities to residents, a move that would facilitate business relationship between non-residents and local businessmen, reports PTI.
Earlier, this facility of providing guarantee by non-residents was available for rupee loans only.
"...it has been decided to extend the facility of
non-resident guarantee under the general permission for non-fund based
facilities (such as Letters of Credit/guarantees/Letter of Undertaking
(LoU) /Letter of Comfort (LoC) ) entered into between two persons
resident in India," RBI said in a notification.
It said there would be no change in method of
discharge of liability by the non-resident guarantor under the guarantee
and the subsequent repayment of the liability by the principal debtor.
The notification further said that a new reporting
format would be introduced to capture such guarantees issued and
invoked. The banks would be required to furnish the details of such
transactions by 10th day of the following month.
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