Establishment of Branch/Liaison Offices in India by foreign entities- Eligibility Criteria and Procedural Guidelines - RBI - Reserve Bank of India
Establishment of Branch/Liaison Offices in India by foreign entities- Eligibility Criteria and Procedural Guidelines
RBI/2007-2008/ May , 2008 To All Authorised Dealers Category - I banks Madam / Sir, Establishment of Branch/Liaison Offices in India by foreign entities- Attention of Authorised Dealer Category - I (AD Category - I) banks is invited to Notification No. FEMA 22/2000-RB dated May 3, 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 / Liaison Office in India. 2. Under the current regulations, the applications from corporates registered outside India (foreign entities), for establishing Branch / Liaison Offices in India are considered by the Reserve Bank under two routes : (i) RBI Route - Applications from foreign entities which are engaged in sectors where sectoral cap for foreign direct investment (FDI) under the Automatic Route is 100 per cent. (ii) Government Route - Applications from foreign entities which are engaged in sectors where sectoral cap for FDI under the Automatic Route is less than 100 per cent which are considered by the Reserve Bank in consultation with the Government of India, Ministry of Finance, Department of Economic Affairs (DEA). 3. With the objective of achieving transparency, it has been decided to place the eligibility criteria and the procedural guidelines for establishment of Branch and Liaison Offices in India, in public domain. Accordingly, the broad criteria regarding eligibility for opening of Branch (BO) / Liaison (LO) Offices, documentation, etc. are given in Annex A and the scope of activities permitted and other procedural guidelines regarding functioning of Branch and Liaison Offices in India are given in Annex B. 4.The application for establishing Branch / Liaison Office in India may be forwarded by the foreign entity in Form FNC (Annex-C) through the 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 required documents. The 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 KYC norms. 5. Applications from banks and insurance companies will continue to be directly received and examined by the Department of Banking Operations and Development (DBOD), Reserve Bank, Central Office and the Insurance Regulatory and Development Authority (IRDA), respectively, as hitherto. As such, the guidelines contained in this Circular are not applicable to such entities and they shall continue to be governed by the terms and conditions stipulated by the respective approving authority. 6. In order to provide a uniform framework, a Unique Identification Number (UIN) would be allotted to both the existing as well as the new Branch / Liaison Office. This UIN will have to be quoted in all references to the Reserve Bank by the BO/LO and AD Category – I bank. 7. The Reserve Bank or the Government of India, as the case may be, has the right to reject an application for non-fulfillment of any other condition/s not specifically referred to in the Annex hereto; fulfillment of which in the opinion of the Reserve Bank / Government of India is necessary for grant of such permission or in public interest. The Reserve Bank or the Government of India, as the case may be, shall also be competent to verify / examine the activities of the Branch / Liaison Office of the foreign entities established in India and to withdraw the permission already granted, after due notice, if the circumstances so warrant or due to changes in policy. 8. AD Category - I banks may bring the contents of this circular to the notice of their constituents/customers concerned. 9. Necessary amendments to the Foreign Exchange Management (Remittance of Assets) Regulations, 2000 notified vide Notification No.FEMA.13/2000-RB dated May 3, 2000 and the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000 notified vide Notification No.FEMA.22/2000-RB dated May 3, 2000 are being issued separately. 10. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (Salim Gangadharan) Annex A Eligibility Criteria and Procedural Guidelines for (i) Eligibility Criteria
(ii) Application Form and Documentation Applications in Form FNC (Annex-C), duly completed in all respects and signed by the authorized signatory of the foreign entity in the home country may be submitted along with Letter of Comfort, wherever applicable (Annex D), to the designated AD Category - I bank for onward transmission to the Reserve Bank, to be forwarded along with their comments and recommendations and the required documents (Item (vii) of Form FNC). [Annex to A. P (DIR Series) Circular No. dated May , 2008] Functioning of a Branch / Liaison Office in India (i) Permitted activities Permitted activities for a Branch / Liaison Office in India would be as under. Branch Office Export/import of goods Rendering professional or consultancy services in the area of the parent entity's activity. Carrying out research work, in which the parent company is engaged. Promoting technical or financial collaborations between Indian companies and parent or overseas group company. Representing the parent company in India and acting as buying/selling agent in India. Rendering services in Information Technology and development of software in India. Rendering technical support to the products supplied by parent/group companies. Liaison Offices Representing in India, the parent company / group companies. Promoting export / import from / to India. Promoting technical/ financial collaborations between parent / group companies and companies in India. Acting as a communication channel between the parent company and Indian companies. (ii) Applications for additional Offices & activities
(iii) Extension of Liaison Offices
(iv) Winding up of Branch / Liaison Offices
[Annex to A. P (DIR Series) Circular No. dated May , 2008] Format of the Comfort Letter To The Chief General anager-in-Charge, Dear Sir, Sub: Application for establishment of Branch / Liaison Office in India by our subsidiary / group company, M/s_________________________ You may kindly refer to the application made by our subsidiary / group company, M/s_____________________________to your office for establishing Branch / Liaison Office in India. 2. In this connection, we, ______________________(the parent company) undertake to provide the necessary financial support for our subsidiary / group company's operations as a Branch / Liaison Office in India. Any liability that may arise due to the functioning of the Branch/Liaison Office in India will be met by us (the parent company) in case of inability on part of the Branch/Liaison Office to do so. 3. We are also enclosing the financial background of our company in the form of our latest Audited Balance Sheet / Account Statement certified by a Certified Public Accountant. Yours faithfully, ( ) Authorised Representative of the parent company. |