Guarantees are one of the cornerstones of any financing transaction. With India’s credit markets increasingly oriented towards cross border transactions, an overhaul of the two-decade old Foreign Exchange Management (Guarantees) Regulations, 2000 (“2000 Regulations”) was long overdue. In an effort to rationalize and streamline the regulatory framework for cross border guarantees, the Reserve Bank of India (“RBI”), on January 06, 2026, notified the Foreign Exchange Management (Guarantees) Regulations, 2026 (“2026 Regulations”), which replace the 2000 Regulations. Additionally, the RBI has made consequential amendments to the guarantee-related provisions in various other master directions to remove inconsistencies and overlaps in the regulatory framework.
In contrast to the transaction-based approach for permissible cross border guarantees under the 2000 Regulations, the 2026 Regulations adopt a principle-based approach that permit cross border guarantees if certain stipulated conditions are satisfied. As a consequence, the 2026 Regulations expand the scope of permissible cross border guarantees under the automatic route, albeit with tightened reporting requirements.
This note highlights and decodes the key features of the 2026 Regulations.
