(i)Authorised dealers may grant loans and overdrafts to persons, firms and companies in India against the guarantees of individuals, firms and companies (including banks) outside India subject to the following conditions:-

(a)No direct or indirect outgo of foreign exchange is involved by way of guarantee commission or otherwise.

(b)The loan is fully secured by the guarantee of an international bank and the lender bank adheres to the guidelines prescribed for capital adequacy, prudential norms, etc. and the lending discipline prescribed for working capital and term loan purposes, by Reserve Bank from time to time.

(c)Regulations relating to normal margin, interest rates, etc. as stipulated by Reserve Bank from time to time are complied with.

Authorised dealers should, however, apply the usual norms and considerations and obtain such security as they consider necessary.

(ii)Authorised dealers should promptly report to Reserve Bank, details of cases where the guarantee has been invoked but the amount has not been remitted by the non-resident guarantor.