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RBI Bars Residents From Credit Guarantees to NRIs Under FEMA

13 January 20261 min read
BANKING & FINANCERBI Bars ResidentsFrom CreditGuarantees toNRIs Under FEMA13 January 2026safalsetu.com

Why in the news

RBI notified fresh foreign exchange regulations that forbid residents in India from giving credit guarantees to NRIs.

Key facts

  • Prohibition: residents cannot issue a credit guarantee in favour of an NRI.
  • Exception: a resident can serve as surety or principal debtor only when two tests are met.
  • Test one: the underlying deal is allowed under foreign exchange law.
  • Test two: resident and non-resident are each eligible to lend or borrow from the other under existing rules.

Legal basis

The rules come under the Foreign Exchange Management Act (FEMA).

Purpose

  • Keep cross-border capital flows within the regulations.
  • Avoid unauthorised financial exposure and risk.

Exam angle

  • Regulator: RBI; Act: FEMA.
  • Banned instrument: credit guarantee by a resident for an NRI.
  • Allowed roles: surety or principal debtor, with conditions.

Test yourself

1. Under the new RBI regulations, resident Indians cannot issue which instrument in favour of NRIs?

The rule prohibits credit guarantees for NRIs.

2. The RBI's bar on credit guarantees to NRIs is issued under which law?

It comes under the Foreign Exchange Management Act.

3. A resident Indian may act as surety for an NRI only if the transaction is permitted under what?

The underlying transaction must be permitted under foreign exchange law.

This topic is part of Daily Current Affairs 13 January 2026 (23 topics).

All topics of the dayDay quizJanuary 2026

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