Establishment of Branch Office (BO)/Liaison Office (LO) in India by Foreign Entities - Eligibility Criteria and Procedural Guidelines – RBI
AN application from a foreign entity to establish Branch / Liaison Office in India is considered on the basis of two criteria viz: basic and additional:
Basic criteria
++ 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.
++ 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 are considered by the Reserve Bank, in consultation with the Government of India, Ministry of Finance.
Additional criteria
Track Record
++ For Branch Office - a profit making track record during the immediately preceding five financial years in the home country.
++ For Liaison Office - a profit making track record during the immediately preceding three financial years in the home country.
Net Worth [total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name].
++ For Branch Office - not less than USD 100,000 or its equivalent.
++ For Liaison Office - not less than USD 50,000 or its equivalent.
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.
++ 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.
++ Foreign airline/shipping company.
Normally, the Branch Office should be engaged in the activity in which the parent company is engaged.
Liaison Office
++ Representing the parent company / group companies in India.
++ 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.
RBI has also announced Delegation of Powers for this.
Circular No. 23 and 24/RBI., Dated: December 30, 2009