75th Founding Day Lecture Meeting on “India@2030” Know More

November 2009

A.P. (DIR Series) Circular No. 11, dated 5-10-2009 : Issue of Bank Guarantee on behalf of service importers.

By Pinky Shah, Sonalee Godbole, Gaurang Gandhi, Nimesh Dedhia, Vijay Kewalramani
Chartered Accountants
Reading Time 2 mins
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Given below are the highlights of certain RBI Circulars.

9. A.P. (DIR Series) Circular No. 11, dated 5-10-2009 : Issue
of Bank Guarantee on behalf of service importers.

Presently, an importer of services is permitted to issue a
Bank Guarantee up to US $ 100,000 or its equivalent in favour of the foreign
supplier of services, subject to certain terms and conditions.

This circular has increased the limit for issuing Bank
Guarantee in favour of the foreign supplier of services from US $ 100,000 to
US $ 500,000 for all importers (other than Public Sector
Companies/Undertakings and Central/State Government Departments), provided the
transaction is a bonafide transaction and the Bank Guarantee is issued to
secure a direct contractual liability arising out of a contract between a
resident and a non-resident. The importer is required to submit in the normal
course, to the Bank issuing the Bank Guarantee, documentary evidence for
import of services.

In the case of Public Sector Companies/Undertakings and
Central/State Government Departments the limit will continue to be US $
100,000. For issue of Bank Guarantee in excess of US $ 100,000 or its
equivalent prior permission is required to be obtained from the Ministry of
Finance, Government of India.

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