Establishment of Branch Office (BO)/Liaison Office (LO) in India by Foreign Entities - Eligibility Criteria and Procedural Guidelines

Attention of Authorised Dealer Category - I (AD Category - I) banks is invited to Notification No. FEMA 22/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Establishment in India of Branch or Office or other place of business) Regulations, 2000, as amended from time to time, in terms of which a person resident outside India requires prior approval of the Reserve Bank for establishing Branch Office (BO) / Liaison Office (LO) in India.

Under the current regulations, the applications from foreign companies (a body corporate incorporated outside India, and includes a firm or other association of individuals) (foreign entities) for establishing BO / LOs in India are considered by the Reserve Bank under two routes:

a)Reserve Bank Route — Principal business of the foreign entity falls under sectors where 100 per cent foreign direct investment (FDI) is permissible under the automatic route.

b)Government Route — Principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible under the automatic route. Applications from entities falling under this category and Non - Government Organisations / Non - Profit Organisations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Government of India, Ministry of Finance.

With the objective of achieving greater transparency, it has been decided to place the eligibility criteria and the procedural guidelines for establishment of BO and LO in India, in the public domain. Accordingly, the broad criteria regarding eligibility for opening of BO / LOs, documentation, etc., are given in Annex A of the circular and the scope of activities permitted and other procedural guidelines regarding functioning of the BO / LO in India are given in Annex B of the circular.

The application for establishing BO / LO in India may be forwarded by the foreign entity in Form FNC (Annex C of the circular) through a designated AD Category - I bank (i.e. an AD Category – I bank identified by the applicant with whom they intend to pursue banking relations) to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division, Central Office, Fort, Mumbai-400 001, along with the prescribed documents. The designated AD Category - I bank should exercise due diligence in respect of the applicant’s background, antecedents of the promoter, nature and location of activity, sources of funds, etc. and also ensure compliance with the KYC norms before forwarding the application together with their comments/ recommendations to the Reserve Bank.

Click the title for the full text of the circular.

Establishment of Branch/Liaison Offices in India by Foreign Entities- Delegation of Powers

Attention of Authorised Dealer Category – I banks is invited to Notification No. FEMA 22/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000 as amended from time to time, in terms of which a person resident outside India requires prior approval of the Reserve Bank for establishing Branch (BO)/ Liaison Offices (LO) in India. As announced in the Mid-term Review of the Annual Policy Statement for the Year 2008-09 (para 143), the draft circulars regarding delegation of powers to Authorised Dealers for extension of the validity period of LOs, closure of BO / LOs of foreign entities in India and the eligibility criteria and procedural guidelines for BO / LOs of foreign entities in India were placed on Reserve Bank’s website for public comments. On the basis of the feedback received from the public, the final guidelines have been issued vide our A. P. (DIR Series) Circular No.23 dated December 30, 2009.

Clcik the title for the text of the circular.