RBI/2008-09/438
A. P. (DIR Series) Circular No.62
April 20, 2009
To
All Category-I Authorised Dealer Banks
Madam / Sir,
External Commercial Borrowings Policy – Liberalisation
Issue of Guarantee for operating lease
Attention of Authorized Dealer Category – I (AD Category –I) banks is invited to
A. P. (DIR Series) Circular No. 24 dated March 1, 2002, in terms of which AD
Category – I banks have been permitted to allow payment of lease rentals,
opening of letters of credit towards security deposit, etc. in respect of import
of aircraft / aircraft engine / helicopter on operating lease basis subject to
conditions mentioned therein. Further, in terms of
A. P. (DIR Series) Circular
No.01 dated July 11, 2008, as a measure of rationalization of the existing
procedures, AD Category - I banks have been allowed to convey ‘no objection’
under the Foreign Exchange Management Act (FEMA), 1999 for creation of charge on
immovable assets, financial securities and issue of corporate or personal
guarantees in favour of overseas lender / security trustee, to secure the ECB to
be raised by the borrower, subject to compliance of prescribed conditions.
- As a further measure of rationalization, it has been decided to allow AD
Category – I banks to convey ‘no objection’ from the Foreign Exchange Management
Act (FEMA), 1999 angle for issue of corporate guarantee in favour of the
overseas lessee, for operating lease in respect of import of aircraft / aircraft
engine / helicopter.
- The ‘no objection’ to the Indian importer for issue of corporate guarantee
under FEMA, 1999 may be conveyed after obtaining -
(i) Board Resolution for issue of corporate guarantee from the company issuing
such guarantees, specifying names of the officials authorised to execute such
guarantees on behalf of the company.
(ii) Ensuring that the period of such corporate guarantee is co-terminus with
the lease period.
- AD Category – I banks may invariably specify that the ‘no objection’ is
issued only from the foreign exchange angle under the provisions of FEMA, 1999
and should not be construed as an approval by any other statutory authority or
Government or any other laws / regulations. If further approval or permission is
required from any other regulatory / statutory authority or Government under the
relevant laws / regulations, the applicant should take the approval of the
authority concerned before undertaking the transaction. Further, the ‘no
objection’ should not be construed as regularizing or validating any
irregularities, contravention or other lapses, if any, under the provisions of
FEMA or any other laws or regulations.
- This shall come into force with immediate effect and will be subject to
review from time to time.
- AD Category – I banks may bring the contents of this circular to the notice
of their constituents and customers concerned.
- Necessary amendment to the Notification No. FEMA 8/2000-RB dated May 3, 2000
[Foreign Exchange Management (Guarantees) Regulations, 2000] is being issued
separately.
- The directions contained in this circular have been issued under Sections
10(4) and 11 (1) of the Foreign Exchange Management Act, 1999 ( 42 of 1999) and
is without prejudice to permissions/approvals, if any, required under any other
law.
Yours faithfully,
Salim Gangadharan
Chief General Manager-in-charge