| Date: |
06-01-2015
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| Notification No: |
RBI/2014-15/387 A.P. (DIR Series) Circular No. 56
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| Issuing Authority: |
RBI
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| Type: |
A.P.D.(Series) Circulars
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| File No: |
RBI/2014-15/387 |
| Subject: |
Non-resident guarantee for non-fund based facilities entered between two resident entities
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RBI/2014-15/387 A
RBI/2014-15/387
A.P. (DIR Series) Circular No. 56
January 6, 2015
To
All Authorised Dealer Category - I Banks
Madam /Sir
Non-resident guarantee for non-fund based facilities entered between two
resident entities
Attention of Authorised Dealer Category - I (AD Category - I) banks is invited
to
A. P. (DIR Series) Circular No. 20 dated August 29, 2012 in terms of which
non-resident guarantee for non-funded facilities such as Letters of
Credit/guarantees/Letters of Undertaking (LoU) /Letter of Comfort (LoC) entered
between two persons resident in India is allowed under the general permission
route.
- It is clarified that under the provisions of aforesaid Circular, residents
that are subsidiaries of multinational companies can also hedge their foreign
currency exposure through permissible derivative contracts executed with an AD
Category – I bank in India on the strength of guarantee of its non-resident
group entity. The method of discharge of liability by the non-resident guarantor
under the guarantee and the subsequent repayment of the liability by the
principal debtor shall continue to be governed, as hitherto, by the provisions
of
A.P. (DIR Series) Circular No. 28 dated March 30, 2001.
- AD Category-I banks may bring the contents of this circular to the notice of
their constituents and customers concerned.
- 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
are without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully
B. P. Kanungo
Principal Chief General Manager
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