What changed
Previously, AD Category-I banks needed RBI approval to issue bank guarantees for non-resident acquirers in FDI transactions like open offers or delisting. Now, they can do so without prior approval, subject to SEBI (SAST) compliance and a counter-guarantee from a bank of international repute. The guarantee must be co-terminus with the offer period under SEBI (SAST) Regulations.
What it means for you
This move eases procedural burdens for banks facilitating FDI, speeding up acquisition processes for non-residents. Banks must ensure strict compliance with SEBI rules and secure robust counter-guarantees to mitigate risk. If the guarantee is invoked, banks must report the incident to the Chief General Manager-in-Charge, Foreign Exchange Department, RBI, Central Office, Mumbai.
What you must do
- Verify that the non-resident acquisition complies with SEBI (SAST) Regulations before issuing the guarantee.
- Ensure the guarantee is backed by a counter-guarantee from a bank of international repute.
- Set the guarantee's tenure to match the offer period as per SEBI (SAST) Regulations.
- Prepare a reporting mechanism for any invocation of the guarantee to the Chief General Manager-in-Charge, Foreign Exchange Department, RBI, Central Office, Mumbai.
- Update internal policies and train staff on the new streamlined process.
Who it affects
AD Category-I banks, Non-resident acquirers of Indian shares or convertible debentures, Indian companies involved in open offers, delisting, or exit offers
What is the key condition for issuing a bank guarantee under this circular?
The guarantee must be covered by a counter-guarantee from a bank of international repute, and the transaction must comply with SEBI (SAST) Regulations.
What happens if the bank guarantee is invoked?
The AD Category-I bank must submit a report to the Chief General Manager-in-Charge, Foreign Exchange Department, RBI, Central Office, Mumbai, detailing the circumstances of the invocation.
Does this circular apply to all types of FDI transactions?
No, it specifically applies to acquisitions through open offers, delisting, or exit offers under SEBI (SAST) Regulations, not all FDI transactions.