Advance Remittance & bank guarantee for import of Services NA to Public Sector Company or a Department of Government, RBI says

Advance Remittance for import of Services
Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 15 dated September 8, 2008, in terms of which the limit for advance remittance for all admissible current account transactions for import of services without bank guarantee was raised from USD 100,000 to USD 500,000 or its equivalent.

It is clarified that the increase in the limit for advance remittance for all admissible current account transactions for import of services without bank guarantee is not applicable for a Public Sector Company or a Department/ Undertaking of the Government of India/ State Governments.

In the case of a Public Sector Company or a Department/ Undertaking of the Government of India/ State Governments, approval from the Ministry of Finance, Government of India for advance remittance for import of services without bank guarantee for an amount exceeding USD 100,000 (USD One hundred thousand) or its equivalent would continue to be required.

Source: RBI/2009-10/ 175 A.P. (DIR Series) Circular No.10 dated October 5, 2009

Issue of Bank Guarantee on behalf of service importers
Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Regulation 4 of the Foreign Exchange Management (Guarantees) Regulations, 2000 notified vide Notification No. FEMA 8/2000-RB dated May 3, 2000, as amended from time to time. In terms of Regulation 4(3)(iv) thereof [amended vide Notification No. FEMA 151/2007-RB dated January 4, 2007] and A.P. (DIR Series) Circular No. 13 dated November 17, 2006, banks are allowed to issue guarantees in favour of a non-resident service provider, on behalf of a resident customer who is a service importer, for an amount up to USD 100,000 or its equivalent, subject to the terms and conditions stipulated in the said circular.

With a view to further liberalise the procedure (other than in respect of a Public Sector Company or a Department/ Undertaking of the Government of India/ State Governments) for import of services, it has been decided to increase the limit for issue of guarantee by AD Category-I banks from USD 100,000 to USD 500,000. Accordingly, AD Category-I banks are now permitted to issue guarantee for amount not exceeding USD 500,000 or its equivalent in favour of a non-resident service provider, on behalf of a resident customer who is a service importer, provided:
(a) the AD Category-I bank is satisfied about the bonafides of the transaction;
(b) the AD Category-I bank ensures submission of documentary evidence for import of services in the normal course; and
(c) the guarantee is to secure a direct contractual liability arising out of a contract between a resident and a non-resident.

In the case of a Public Sector Company or a Department/ Undertaking of the Government of India/ State Governments, approval from the Ministry of Finance, Government of India for issue of guarantee for an amount exceeding USD 100,000 (USD One hundred thousand) or its equivalent would be required.

Source: RBI/2009-10/ 176 A.P. (DIR Series) Circular No.11 dated 5th October, 2009