What changed
Previously, foreign entities needed RBI approval to establish liaison offices. Now, foreign insurance companies with prior IRDA approval can set up such offices under a general permission framework, eliminating the need for individual RBI clearance for this category.
What it means for you
This streamlines market entry for foreign insurers, reducing regulatory duplication. Banks must ensure these offices comply with FEMA conditions—no local income, no borrowing, and expenses funded from abroad—to avoid violations.
What you must do
- Update internal FEMA compliance checklists to include the new general permission for foreign insurers with IRDA approval.
- Advise customers that liaison offices cannot earn income, borrow, or lend in India; expenses must come from abroad via banking channels.
- Remind clients to submit annual auditor certificates to IRDA confirming compliance with RBI/IRDA conditions.
- Ensure closure of such offices is handled through IRDA with intimation to RBI, not directly by the bank.
Who it affects
Authorised Dealer Banks handling foreign exchange transactions, Foreign insurance companies seeking to establish liaison offices in India, IRDA and RBI compliance teams
Do foreign insurers still need RBI approval for liaison offices?
No, if they have prior IRDA approval, RBI grants general permission under FEMA. However, they must comply with all conditions in the circular's annex.
Can a liaison office earn any income in India?
No. The office cannot charge fees, earn commissions, or receive any remuneration for its activities unless specifically approved by IRDA.
What happens if a liaison office wants to close down?
Closure is handled by IRDA, with intimation to RBI. Banks should not process closure directly without this regulatory clearance.