Section 4 in 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
4. Approval for opening a branch office or a liaison office or a project office or any other place of business in India.
- a. Eligibility. - A person resident outside India can establish a branch office or a liaison office in India provided it meets the following criterion:(i)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.(ii)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.(III)Entities engaged in construction and development sectors and which are Non-Banking Finance Companies are permitted to open a Liaison Office for two years only. No further extension would be considered for liaison offices of entities which are Non-Banking Finance Companies and those engaged in construction and development sectors (excluding infrastructure development companies). Upon expiry of the validity period, the offices shall have to either close down or be converted into a Joint Venture / Wholly Owned Subsidiary in conformity with the extant Foreign Direct Investment policy.(e)Additional offices. - A person resident outside India desiring to establish additional branch office or liaison office may submit to the Authorised Dealer Category-I bank a fresh FNC Form along with the justification for the need for additional office/s.(f)Project office. - (I) A foreign company may open project office/s in India provided it has secured from an Indian company, a contract to execute a project in India, and(i)the project is funded directly by inward remittance from abroad; or(ii)the project is funded by a bilateral or multilateral International Financing Agency; or(iii)the project has been cleared by an appropriate authority; or(iv)a company or entity in India awarding the contract has been granted term loan by a Public Financial Institution or a Bank in India for the Project.Explanation: For the purpose of this Regulation,(i)'a bilateral or multilateral International Financing Agency' means the World Bank or the International Monetary Fund or similar other body.(ii)"Public Financial Institution" is a public financial institution as defined in Section 4A of the Companies Act, 1956.(II)A person from any country other than Pakistan who has been awarded a contract for a project by a Government Authority/ Public Sector Undertaking may open a bank account with an Authorised Dealer Category-I bank without any prior approval from the Reserve Bank.(g)Registration with State Police Authorities. - A person from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau opening a branch office or a liaison office or a project office or any other place of business in India shall have to register with the concerned State Police Authorities. Copy of approval letter for 'persons' from these countries shall be marked by the AD Category-I bank to the Ministry of Home Affairs, Internal Security Division-I, Government of India, New Delhi.(h)Fund/non-fund based facilities. - Authorised Dealer Category-I bank may extend fund and/or non-fund based facilities to branch office and project offices based on the guidelines issued by the Reserve Bank in this regard.(i)Remittance of profit or surplus. - (I) Branch office may remit outside India profit of the branch net of applicable Indian taxes, on production of the following documents to the satisfaction of the Authorised Dealer Category-I bank through whom the remittance is effected:(i)A certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year.(ii)A Chartered Accountant's certificate certifying
