What changed
This Master Circular consolidates all existing instructions on foreign entity offices into a single document, replacing multiple circulars. It includes a sunset clause, expiring on July 1, 2014, after which an updated version will be issued. The circular clarifies the two routes (Reserve Bank and Government) for approval based on FDI sector limits.
What it means for you
Banks must ensure foreign entity applications meet the profit track record and net worth thresholds before forwarding to RBI. The consolidated circular simplifies compliance but requires banks to stay updated on sector-specific FDI rules for route determination. Non-compliance could delay approvals or lead to rejections.
What you must do
- Verify foreign entity's profit track record (3 years for LO, 5 for BO) and net worth (LO: $50K, BO: $100K) before forwarding applications.
- Classify applications under Reserve Bank or Government route based on FDI sector limits.
- Ensure all applications are submitted in Form FNC with required documents to RBI's Foreign Investment Division.
- Monitor the sunset clause and prepare for the updated circular after July 1, 2014.
Who it affects
AD Category-I banks, Foreign entities seeking LO/BO/Project Office in India, RBI's Foreign Exchange Department
What are the net worth requirements 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.
How should applications be submitted to RBI?
Applications must be forwarded through a designated AD Category-I bank to the Chief General Manager-in-Charge at RBI's Foreign Investment Division in Mumbai.
What happens after the sunset clause on July 1, 2014?
This circular will be withdrawn and replaced by an updated Master Circular on the same subject.