What changed
Previously, Indian agents of foreign airlines needed RBI approval to arrange bank guarantees for ticketing. Now, AD banks can issue these guarantees in their ordinary course of business. If a guarantee is invoked, the bank must report the details to RBI's Central Office.
What it means for you
This delegation reduces regulatory burden on travel agents and speeds up guarantee issuance, a standard industry requirement. Banks gain operational flexibility but must monitor invocation risks and report any such events promptly to RBI.
What you must do
- Update internal policies to allow issuance of guarantees to foreign airlines/IATA for IATA-approved travel agents without prior RBI approval.
- Ensure a process is in place to send a detailed report to RBI's Chief General Manager, Foreign Exchange Department, if a guarantee is invoked.
- Communicate this circular to all relevant branches and customers dealing with airline ticketing.
- Verify that all guarantees are issued only to IATA-approved travel agents as specified.
Who it affects
Authorised Dealer (AD) banks, IATA-approved travel agents, Indian agents of foreign airline companies
Do we still need RBI approval for each bank guarantee to foreign airlines?
No, AD banks can now issue these guarantees in their ordinary course of business without prior RBI approval, provided the beneficiary is a foreign airline or IATA and the applicant is an IATA-approved travel agent.
What should we do if a guarantee we issued is invoked?
You must send a detailed report explaining the circumstances to the Chief General Manager, Foreign Exchange Department, External Payments Division, RBI, Central Office, Mumbai.
Does this circular amend the FEMA Guarantees Regulations?
Yes, the circular states that necessary amendments to the Foreign Exchange Management (Guarantees) Regulations, 2000 are being issued separately to reflect this delegation.