RBI Notifies New Foreign Exchange Management (Guarantees) Regulations, 2026

The Reserve Bank of India has introduced a new regulatory framework to govern guarantees involving persons resident outside India. By notifying the Foreign Exchange Management (Guarantees) Regulations, 2026, the central bank aims to improve transparency, simplify compliance, and ensure uniformity in the handling of cross-border guarantees by authorized dealer banks.

Why in the News?

The Reserve Bank of India has issued the Foreign Exchange Management (Guarantees) Regulations, 2026. These regulations provide a consolidated framework for guarantees involving non-residents under FEMA.

Key Features of the New Regulations

• The 2026 regulations lay down a comprehensive framework for issuance, modification, and invocation of guarantees involving persons resident outside India.
• All Authorized Dealer Category-I banks have been directed to strictly follow these rules while facilitating such guarantees.
• The RBI has also instructed banks to ensure compliance with guidelines issued by the Department of Regulation.

Mandatory Reporting and Compliance

• A major reform under the new regulations is mandatory comprehensive reporting of all guarantees issued, modified, or invoked.
• Banks must submit details in a prescribed format, the procedure for which will be communicated separately.
• With this move, the RBI aims to create a centralized and transparent database of foreign exchange guarantees, reducing regulatory gaps and monitoring risks more effectively.

Withdrawal of Earlier Circulars and Reporting Changes

• With the notification of the new regulations, several earlier A.P. (DIR Series) circulars have been superseded.
• The RBI has also discontinued quarterly reporting of guarantees for Trade Credit with effect from the quarter ending March 2026, simplifying compliance requirements for banks and businesses engaged in international trade.

Amendments to Existing FEMA Directions

• The RBI has amended guarantee-related provisions in multiple existing Master Directions.
• These include directions on External Commercial Borrowings (ECB), Trade Credits, Export and Import of Goods and Services and Reporting under FEMA, 1999.
• The amendments ensure consistency across regulatory frameworks and remove overlaps or ambiguities.

Background of FEMA and RBI’s Regulatory Role

• The Foreign Exchange Management Act, 1999 empowers the RBI to regulate foreign exchange transactions in India.
• FEMA focuses on facilitating external trade, promoting orderly foreign exchange markets, and maintaining financial stability.
• The new Guarantees Regulations, 2026 reinforce this objective by modernising oversight of cross-border financial commitments.

Key Summary at a Glance

Aspect	Details
Why in News?	RBI issued new guarantees regulations
Regulation Name	FEMA (Guarantees) Regulations, 2026
Applicable To	Guarantees involving non-residents
Reporting Norm	Mandatory reporting of all guarantees
Key Change	Old circulars superseded
Trade Credit	Quarterly reporting discontinued
Legal Basis	FEMA, 1999
Objective	Transparency and regulatory clarity

Question

Q1. The Foreign Exchange Management (Guarantees) Regulations, 2026 have been issued under which Act?
A. Banking Regulation Act, 1949
B. RBI Act, 1934
C. FEMA, 1999
D. Companies Act, 2013