Indian promoters likely to give personal guarantee on foreign assets

RBI proposal a departure from current norms under Fema

In a major shift from its earlier stance, the Reserve Bank of India (RBI) on Monday proposed allowing Indian promoters to issue personal guarantees for overseas firms in which they have acquired a controlling stake, albeit with limits.

At the same time, an Indian company can pledge its foreign shareholding to raise funds overseas. Local companies can even pledge their Indian assets to raise funds for overseas entities, but within prescribed limits.

The guarantees, either by an individual or a corporate entity in India, should not be “open-ended”. In other words, there will be limits and conditions on how much guarantee can