What changed
RBI reiterated that foreign NGOs, non-profit organizations, and foreign government bodies/departments require prior RBI permission to establish any office in India, including project offices. This is under the government route as per earlier circular, not the general permission route available to foreign companies with project contracts.
What it means for you
Banks must ensure that applications from such foreign entities for LO/BO/PO are routed through the government approval process, not the automatic route. This adds a compliance layer for AD banks processing these requests, requiring verification of RBI approval before facilitating remittances or operations.
What you must do
- Update internal compliance checklists to flag foreign NGOs, non-profits, and government bodies for mandatory RBI prior approval.
- Advise customers that project office applications from these entities require government route clearance, not general permission.
- Train staff to distinguish between foreign companies (eligible for general permission) and these entities (require prior RBI nod).
- Ensure all related remittances or account openings are backed by RBI approval documentation.
Who it affects
AD Category-I banks, Foreign NGOs and non-profit organizations seeking India presence, Foreign government bodies/departments, Indian companies contracting with such foreign entities
Does this circular apply to all foreign entities wanting to set up a project office?
No. Foreign companies with a project contract from an Indian company can use general permission under FEMA 95/2000-RB. But foreign NGOs, non-profits, and government bodies must get prior RBI approval under the government route.
What should AD banks do if a foreign NGO applies for a liaison office?
Reject the application under general permission. Guide the entity to apply to RBI for prior approval under the government route as specified in A.P. (DIR Series) Circular No. 23 dated December 30, 2009.
Is this a new regulation or just a clarification?
It is a clarification of existing rules under FEMA 22/2000-RB and FEMA 95/2000-RB, reiterating that the government route applies to these specific entities.