If you’re a foreign entity considering entering the Indian market, you’ll be making an FDI investment. This means there is more assistance available to you (through Make in India, Invest India, etc.) than is to the usual domestic business firms trying to expand their operations across the country. The procedure for opening branch offices is also slightly different.
Companies that are registered outside India, desirous of launching their business or opening a branch at a location within the country, can do so after getting an application for the same approved from the Reserve Bank of India (rbi.org.in).
Eligibility Criteria for Foreign Entities Opening a Branch in India
The laws and regulations governing the registration of a branch office in India, or a liaison or project office, include the Companies Act 1956, Companies Act 2013, and the Foreign Exchange Management Act, 1999 (FEMA).
The eligibility criteria for companies who want to open a branch office in India include:
1. Net worth of $100,000 or more, or equivalent.
2. Financial track record of annual profits for the last five years in the original country of registration.
Application Form For Opening Branch Office in India
Fill up Form FNC (Annex-1). Your application for opening a new branch office in India will be considered directly by the RBI if it falls under one of the sectors where 100% FDI investment is allowed. For other sectors, the application must be approved by the Ministry of Finance as well as RBI.
The application must be submitted by you (the foreign entity) through a designated AD Category – I bank. It must be addressed to:
The General Manager, Foreign Exchange Department, Central Office Cell,
Reserve Bank of India, New Delhi Regional Office, 6,
Parliament Street, New Delhi-110 001, India
Documents Required for India Branch Office Application
Along with Form FNC, you will also need to attach the following documents:
1. Business registration or incorporation certificate, or Articles of Memorandum / Association, attested by a Notary Public or the Indian Embassy in the country of registration;
2. Audited balance sheet
In addition to these two requirements, the bank that forwards your application to the RBI will ask for verification documents (KYC, funding sources, address, etc.).
Permissible Activities as a Branch Office of a Foreign Entity
The RBI and Government of India have issued certain regulations that govern what the branch office of a foreign entity can do. Branch offices may not undertake manufacturing or processing activities, except in SEZs. The permissible activities that branch offices can undertake include:
1. Consultancy and professional services.
2. Import and Export trading of goods.
3. Acting as a buyer / seller representative of the overseas parent company.
4. Providing technical support for the parent company’s customers in India.
5. Research that the overseas parent company is already engaged in.
How to Open a Manufacturing Branch Office in India
If you are a foreign entity interested in opening a unit or branch office in India for undertaking manufacturing activities, it must be located in a Special Economic Zone. It must be compliant with Section 6 of Companies Act 1956, and able to function as a stand-alone unit in a sector in which 100% FDI is allowed.
For additional information on setting up a new branch/liaison/project office in India, and the operational compliance and reporting requirements, opening of a foreign currency account, etc., visit the RBI website at rbi.org.in.
