What changed
RBI issued a clarification that the general permission for project offices (from 2003 guidelines) remains subject to Regulation 4 of FEMA 22/2000. This means citizens of six specified countries still need prior RBI approval, even if general permission conditions are met.
What it means for you
Banks must ensure that any project office application from entities linked to citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, or China is not processed under general permission. Such cases require a separate prior approval from RBI, adding a compliance layer for lenders handling these applications.
What you must do
- Verify the nationality of all beneficial owners and key personnel for project office applications.
- Reject or escalate any project office setup request from entities owned/controlled by citizens of the six specified countries without prior RBI approval.
- Update internal FEMA compliance checklists to explicitly flag these nationality restrictions.
- Train relationship managers and compliance teams on this circular's implications for project office processing.
Who it affects
AD Category-I banks handling project office applications, Foreign entities from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, or China, Compliance departments of all authorized dealer banks
Does this circular apply to liaison or branch offices as well?
Yes, the circular references Regulation 4 of FEMA 22/2000, which covers branch, liaison, project offices, and any other place of business for citizens of the six specified countries.
What should a bank do if a project office application is received from a Chinese entity?
The bank must not process it under general permission. It must inform the entity that prior RBI approval is mandatory and guide them to apply separately to RBI.
Does this circular change any existing general permission conditions?
No, it only clarifies that the general permission is subject to the nationality restrictions in FEMA 22/2000. The conditions from the 2003 circular remain unchanged for other entities.