In terms of the Notification No. FERA.132/93-RB dated 26th April 1993, issued under Section 26 of FERA 1973, authorised dealers have the permission to give performance bond or guarantee in favour of overseas buyers on account of bonafide exports from India. Before issuing any such guarantees, they should satisfy themselves with the bona fides of the applicant and his ability to perform the contract and also that the value of the bid/guarantee as a percentage of the value of the contract/tender is reasonable and according to the normal practice in international trade and that the terms of the contract are in accordance with the Exchange Control regulations. Authorised dealers may also, subject to what has been stated above, issue counter-guarantees in favour of their branches/correspondents abroad in cover of guarantees required to be issued by the latter on behalf of Indian exporters in cases where guarantees of only resident banks are acceptable to overseas buyers in accordance with local laws/regulations. If and when the bond/guarantee is invoked, authorised dealers may make payments due thereunder to non-resident beneficiaries but a report should be sent to Reserve Bank where the amount of the remittance exceeds U.S.$ 5000 or its equivalent.

NOTE: Prior approval of Reserve Bank should be obtained by authorised dealers for issue of performance bonds/guarantees in respect of caution-listed exporters.