Section 6(4) in The Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004
(4)[(i) An Indian Party may extend a loan or a guarantee to or on behalf of the Joint Venture/Wholly Owned Subsidiary abroad, within the permissible financial commitment, provided that the Indian Party has made investment by way of contribution to the equity capital of the Joint Venture.Notwithstanding the above regulation, the following shall also be permitted.(ii)An Indian Party may extend corporate guarantee on behalf of its first generation step down operating company within the prevailing limit for overseas, direct investment. Explanation: Issue of corporate guarantee on behalf of second level or subsequent level step down operating subsidiaries will be considered under the Approval Route, provided the Indian Party indirectly holds 51 per cent or more stake in the overseas subsidiary for which such guarantee is intended to be issued.](iii)[ The indirect resident individual promoters of the Indian party may issue personal guarantee on behalf of the overseas JV/WOS of the Indian party provided the provisions under Regulation 6 are fulfilled by the Indian party and further provided that: [Inserted by Notification No. G.S.R. 516 (E) dated 8.5.2013 (w.e.f. 28.3.2012)]a) total 'financial commitment' including all forms of guarantees remains within the overall ceiling stipulated for overseas investment by an Indian Party andb) no guarantee is 'open ended'.(iv)With prior approval of the Reserve Bank, an Indian party may undertake financial commitment without equity contribution in JV/WOS provided it is as per the business , requirement of the Indian party and also as per the legal requirement of the host country.(v)Compulsorily Convertible Preference Shares (CCPS) shall be treated at par with equity shares and the Indian party is allowed to undertake financial commitment based on the contribution to JV by way of CCPS.]
