What changed
RBI has placed in the public domain the eligibility criteria and procedural guidelines for establishing Branch Offices (BO) and Liaison Offices (LO) in India by foreign entities. This move aims to achieve greater transparency. A Unique Identification Number (UIN) will now be allotted to both existing and new BOs/LOs for uniform reference.
What it means for you
Banks acting as designated AD Category-I must now conduct thorough due diligence on applicants' background, promoter antecedents, and source of funds before forwarding applications. The UIN requirement streamlines regulatory tracking. Foreign banks and insurance companies continue to be handled separately by DBOD and IRDA.
What you must do
- Ensure your bank's KYC and due diligence processes are robust for foreign entity applications under Form FNC.
- Designate a point of contact for handling BO/LO applications and coordinate with RBI's Foreign Investment Division.
- Advise foreign entity clients to obtain and quote their UIN in all communications with RBI.
- Stay updated on sector-specific FDI limits to correctly route applications under Reserve Bank or Government route.
Who it affects
AD Category-I banks handling foreign entity applications, Foreign companies seeking to establish BO/LO in India, Existing BOs/LOs that need to obtain UIN
What is the role of the designated AD Category-I bank in this process?
The designated bank must perform due diligence on the applicant's background, promoter antecedents, nature and location of activity, and sources of funds, ensuring KYC compliance before forwarding the application with comments to RBI.
Do foreign banks and insurance companies follow the same procedure?
No, applications from foreign banks are handled by DBOD, RBI, and those from insurance companies by IRDA, as per existing practice.
Is RBI approval needed for setting up a branch in a Special Economic Zone (SEZ)?
No, prior RBI approval is not required for establishing a branch/unit in SEZs for manufacturing and service activities, subject to conditions in FEMA Notification No. 102/2003-RB.