What changed
This July 2010 Master Circular consolidates all existing FEMA instructions on foreign entity offices into one document. It replaces multiple earlier circulars and notifications with a sunset clause of one year, expiring July 1, 2011.
What it means for you
Banks must ensure foreign entities meet profit and net worth criteria before forwarding applications. The circular clarifies two approval routes: RBI route for 100% FDI sectors, Government route for others. AD Category-I banks play a key role in processing applications and verifying documents.
What you must do
- Verify foreign entity's profit track record: 5 years for Branch Office, 3 years for Liaison Office.
- Confirm net worth meets thresholds: USD 100,000 for Branch Office, USD 50,000 for Liaison Office.
- Forward applications in Form FNC through designated AD Category-I bank to RBI's Foreign Investment Division.
- Ensure all documents are attested, including English version of incorporation certificate and latest audited balance sheet.
Who it affects
AD Category-I banks handling foreign entity applications, Foreign entities seeking to establish offices in India, RBI's Foreign Exchange Department
What is the net worth requirement for a Liaison Office?
The foreign entity must have a net worth of at least USD 50,000 or its equivalent, as per the latest audited balance sheet.
Which route applies if the foreign entity's business is in a sector with 100% FDI under automatic route?
Such applications are considered under the RBI Route, meaning approval from the Reserve Bank directly without needing government consultation.
What happens if the foreign entity does not meet the eligibility criteria?
Applicants that are subsidiaries of other companies may submit a Letter of Comfort from their parent company to satisfy the criteria.