What changed
RBI delegated powers to AD Category-I banks for processing foreign entity BO/LO applications (excluding insurance and banking), including forwarding applications with due diligence and KYC compliance. From February 1, 2010, annual activity certificates must be submitted to the designated AD bank and Income Tax authorities, not directly to RBI. A Unique Identification Number (UIN) will be issued for all BO/LOs and must be used in all future references.
What it means for you
Banks now have a formal role in vetting and forwarding foreign entity BO/LO applications, reducing RBI's direct workload. This streamlines the process for foreign entities but places due diligence and KYC responsibility on AD banks. Existing BO/LOs must now route all requests through their designated AD bank, ensuring a single point of contact and consistent tracking via UIN.
What you must do
- Designate a nodal officer to handle BO/LO applications and ensure KYC and due diligence compliance before forwarding to RBI.
- Update internal systems to capture and track UIN for all existing and new BO/LO clients.
- Inform existing BO/LO clients that from February 1, 2010, all submissions (including annual activity certificates) must go through your bank.
- Train staff on the new annual activity certificate submission timeline (by April 30 each year) and the requirement to send a copy to Income Tax authorities.
Who it affects
AD Category-I banks, Foreign entities seeking to open BO/LO in India (excluding insurance and banking), Existing BO/LOs in India, RBI's Foreign Exchange Department
What is the UIN and why is it important?
UIN stands for Unique Identification Number, which RBI will allot to every BO/LO. It must be quoted in all future communications with RBI, ensuring consistent tracking and reference.
Do insurance and banking companies follow the same process?
No. Applications from banks and insurance companies for BO/LO are still handled directly by RBI's Department of Banking Operations and Development and IRDA respectively, not through AD banks.
What happens if a foreign entity wants to set up a unit in a Special Economic Zone (SEZ)?
RBI approval is not required for establishing a branch/unit in SEZs for manufacturing or service activities, provided conditions under FEMA Notification No. 102/2003-RB are met.