What changed
RBI has extended the prior approval requirement for establishing liaison, branch, or project offices in India to entities registered in or resident of Hong Kong and Macau. Previously, this restriction applied only to citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, and China under FEMA regulations. The amendment has been formalized through Notification No. FEMA.293/2013-RB dated November 12, 2013.
What it means for you
Banks must now treat applications from Hong Kong and Macau entities for any office setup in India as requiring RBI approval, not just general permission. This tightens scrutiny on foreign investments and operations from these regions, impacting cross-border business facilitation. AD Category-I banks need to update their internal processes and customer advisories accordingly.
What you must do
- Update internal guidelines to flag all applications from Hong Kong and Macau entities for liaison/branch/project offices as requiring prior RBI approval.
- Inform existing and prospective customers from Hong Kong and Macau about the new approval requirement.
- Ensure no such office is permitted without explicit RBI clearance, and maintain records of all related applications.
- Coordinate with RBI for any pending or new applications from these regions to avoid compliance gaps.
Who it affects
AD Category-I banks, Entities registered in or resident of Hong Kong, Entities registered in or resident of Macau, Foreign entities seeking to establish offices in India
Does this circular apply to all types of offices from Hong Kong and Macau?
Yes, it covers liaison offices, branch offices, project offices, and any other place of business by whatever name called.
What is the effective date of this requirement?
The amendment regulations were notified on November 12, 2013, and this circular was issued on January 15, 2014, clarifying the applicability.
Are there any exceptions for entities from Hong Kong or Macau?
No exceptions are mentioned; all such entities require prior RBI approval, similar to restrictions for citizens of specified countries.