Overseas Direct Investments – Rollover of Guarantees

                Reserve Bank of India, has advised ‘All Category – I Authorised Dealer Banks’, the following points with reference to – Overseas Direct Investments – Rollover of Guarantees

The original circular is : Notification No. FEMA.120/RB-2004 dated July 7, 2004 [Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2004] (the Notification), as amended from time to time.

It has been decided not to treat / reckon the renewal / rollover of an existing / original guarantee, which is part of the total financial commitment of the Indian party in terms of Regulation 6 of the Notification ibid, as a fresh financial commitment, provided that :

  • the existing / original guarantee was issued in terms of the then extant / prevailing FEMA guidelines.
  • there is no change in the end use of the guarantee, i.e. the facilities availed by the JV / WOS / Step Down Subsidiary;
  • there is no change in any of the terms & conditions, including the amount of the guarantee except the validity period;
  • the reporting of the rolled over guarantee would be done as a fresh financial commitment in Part II of Form ODI, as hitherto; and
  • if the Indian party is under investigation by any investigation / enforcement agency or regulatory body, the concerned agency / body shall be kept informed about the same.

In case, however, the above conditions are not met, the Indian party shall obtain prior approval of the Reserve Bank for rollover / renewal of the existing guarantee through the designated AD bank.

AD – Category I banks have been advised to bring the contents of this circular to the notice of their constituents and customers concerned.

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