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Persons resident outside India must obtain prior approval from the Reserve Bank of India to open a branch office, liaison office, project office, or any other place of business in India. The applicant submits Form FNC to an Authorised Dealer Category-I bank. Certain banking and insurance companies and SEZ manufacturing units do not require approval under specific conditions. Entities from specified countries require registration with State Police Authorities. Branch and liaison offices must meet net worth and profit track record criteria. Applicants from Pakistan, or in sensitive sectors like Defence and Telecom, require prior Reserve Bank approval.
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Relative A.P. (DIR) circular: 69/12.05.2016
RESERVE BANK OF INDIA FOREIGN EXCHANGE DEPARTMENT CENTRAL OFFICE MUMBAI 400001 Notification No. FEMA 22(R)/ 2016-RB March 31, 2016 (Amended upto January 21, 2019) (Amended upto August 31, 2018) Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016
In exercise of the powers conferred by sub-section (6) of Section 6 of the Foreign Exchange Management Act, 1999 (42 of 1999), and in supersession of Notification No. FEMA 22/2000-RB dated May 3, 2000, as amended from time to time, the Reserve Bank of India makes the following regulations to prohibit, restrict and regulate establishment in India of a branch office or a liaison office or a project office or any other place of business by a person resident outside India:-
These Regulations may be called the Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016.
They shall come into force from the date of their publication in the Official Gazette.
In these regulations, unless the context otherwise requires –
'Act' means the Foreign Exchange Management Act, 1999 (42 of 1999).
‘Authorised Dealer’ means a person authorised as an authorised dealer under sub-section (1) of section 10 of the Act.
'Foreign company' means a body corporate incorporated outside India and includes a firm or other association of individuals.
'Branch Office' in relation to a company, means any establishment described as such by the company.
'Liaison Office' means a place of business to act as a channel of communication between the principal place of business or Head Office or by whatever name called and entities in India but which does not undertake any commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel.
'Project Office' means a place of business in India to represent the interests of the foreign company executing a project in India but excludes a Liaison Office.
'Site Office' means a sub-office of the Project Office established at the site of a project but does not include a Liaison Office.
‘Stand-alone basis’ means such branch offices would be isolated and restricted to the Special Economic Zone alone and no business activity/ transaction will be allowed outside the Special Economic Zones in India which includes branches/subsidiaries of its parent office in India.
The words and expressions used but not defined in these Regulations, shall have the same meanings respectively assigned to them in the Act.
No person resident outside India shall without prior approval of the Reserve Bank open in India a branch office or a liaison office or a project office or any other place of business by whatever name called except as laid down in these Regulations.
Provided that
(a) A banking company resident outside India shall not require any approval under these Regulations for establishing any office in India if such company has obtained necessary approval under the provisions of the Banking Regulation Act, 1949.
(b) An insurance company resident outside India shall not require any approval under these Regulations for establishing any office in India if such company has obtained approval from the Insurance Regulatory and Development Authority established under section 3 of the Insurance Regulatory and Development Authority Act, 1999.
(c) A company resident outside India shall not require any approval under these Regulations to establish a branch office in the Special Economic Zones (SEZs) to undertake manufacturing and service activities, subject to the conditions that:
a. Eligibility
A person resident outside India can establish a branch office or a liaison office in India provided it meets the following criterion:
For Branch Office — a profit making track record during the immediately preceding five financial years in the home country and net worth of not less than USD 100,000 or its equivalent.
For Liaison Office — a profit making track record during the immediately preceding three financial years in the home country and net worth of not less than USD 50,000 or its equivalent.
Provided that a person resident outside India that is not financially sound and are subsidiaries of other companies may submit a Letter of Comfort (Annex A) from their parent company subject to the condition that the parent company satisfies the prescribed criterion for net worth and profit.
b. Permissible activities
A person resident outside India permitted by the Reserve Bank under these Regulations to establish a branch or liaison office in India may undertake or carry on any activity specified in Schedule I or II (Annex B), as the case may be, but shall not undertake or carry on any other activity unless otherwise specifically permitted by the Reserve Bank.
c. Application form
A person resident outside India desiring to establish a branch office or a liaison office or a project office or any other place of business in India shall submit an application in Form FNC (Annex C) to an Authorised Dealer Category-I bank who may, subject to the provisions of Regulation 5, grant approval as per the directions and/or guidelines issued by the Reserve Bank in this regard. In case no office is opened by the person resident outside India within six months from the date of approval letter, the approval for establishing the office in India shall be cancelled. In cases where the person resident outside India is not able to open the office within the stipulated time frame due to reasons beyond their control, the Authorised Dealer Category-I bank may consider granting extension of time for setting up the office by a further period of six months. Any further extension of time shall require the prior approval of the Reserve Bank in this regard.
d. Extension of the validity period for liaison office
I. A person resident outside India may establish in India under these Regulations a liaison office for a period of three years subject to the provisions of Regulation 4 d (III). The non-resident entity may apply to the Authorised Dealer Category-I bank concerned for extension of the validity period of approval, and upon receipt of such an application, the Authorised Dealer Category-I bank concerned may extend the validity period of approval for a period of three years from the date of expiry of the original approval / extension granted, subject to such directions issued by the Reserve Bank in this regard.
II. The application for extension of the validity period of the liaison office of banks and entities engaged in insurance business has to be directly submitted to the Department of Banking Regulation (DBR), Reserve Bank and the Insurance Regulatory and Development Authority (IRDA) respectively.
