This circular has been superseded vide
RBI/2025-26/192
A.P. (DIR Series) Circular No. 19 dt. 12.01.2026
RBI/2008-09/438
A. P. (DIR Series) Circular No. 62 Dated 20/4/2009
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.
2. 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.
3. 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.
4. 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.
5. This shall come into force with immediate effect and will be subject to
review from time to time.
6. AD Category – I banks may bring the contents of this circular to the notice
of their constituents and customers concerned.
7. Necessary amendment to the Notification No. FEMA 8/2000-RB dated May 3, 2000
[Foreign Exchange Management (Guarantees) Regulations, 2000] is being issued
separately.
8. 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