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of <h1>RBI Clarifies Rules on Non-Resident Guarantees for Subsidiaries of Multinational Companies in India under FEMA 1999.</h1> The circular issued by the Reserve Bank of India (RBI) addresses non-resident guarantees for non-fund based facilities, such as Letters of Credit and guarantees, between two resident entities in India. It clarifies that subsidiaries of multinational companies in India can hedge foreign currency exposure using derivative contracts with authorized banks, backed by non-resident group entity guarantees. The discharge and repayment of liabilities under these guarantees remain governed by previous regulations. Authorized banks are instructed to inform their clients of these provisions. The circular is issued under the Foreign Exchange Management Act, 1999, and does not affect other legal permissions or approvals.
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