Advance Remittance – Import of services

Authorised Dealers (Category-I banks) may allow advance remittance for import of services. However, where the amount exceeds USD 500,000 or its equivalent, a guarantee from a bank of International repute situated outside India or a guarantee from an Authorised Dealer in India, if such a guarantee is issued against the counter-guarantee of a bank of International repute situated outside India, should be obtained from the overseas beneficiary. 

The Authorised Dealer should also follow up to ensure that the beneficiary of the advance remittance has fulfilled his obligations under the contract or agreement with the remitter in India.

In the case of a Public Sector Company or a Department /Undertaking of the Government of India /State  Governments, approval from the Ministry of Finance, Government of India for advance remittance for import of services without bank guarantee for an amount exceeding USD 100,000 (US Dollars one hundred thousand only) or its equivalent is required. 

R.V.Seckar

rvsekar2007@gmail.com

919848915177

Can Indian Company can extend Guarantee to a foreign company which is a subsidiary of its 100% owned foreign subsidiary ?

Company A can give Corporate Guarantee to a Bank abroad on behalf of Company C. Company B is a 100% subsidiary of A and B is having a 49% holding in Company C.
. Which Guidelines govern the same and what would be the statutory formalities for the same???


Notification No.FEMA 8/2000-RB dated 3rd May 2000 . The notification provides the following prohibition:

Prohibition :-

Save as otherwise provided in these regulations, or with the general or special permission of the Reserve Bank, no person resident in India shall give a guarantee or surety in respect of, or undertake a transaction, by whatever name called, which has the effect of guaranteeing, a debt, obligation or other liability owed by a person resident in India to, or incurred by, a person resident outside India.

RBI master circular on WOS / JV abroad dated July 1, 2010.. In terms of the circular guarantee can ben given on behalf of a subsidiary / JV in which Company 'A' has equity participation. Going by this, Company A can't give guarantee on behalf of Company 'C'

Hence , Guarantee can be offered by a Indian Company to a foreign company in a structured business transactions only. The prohibition clause says even with the general or special permission from RBI , Guarantee cannot be given unless there is a structured business transaction.

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