Branch Office (BO) setting up is the way for foreign entities to enter India and explore the potential of Indian markets. Foreign entities can set up offices in India without registering themselves as comPANies. BO office establishment of a BO in India is regulated by the by RBI through Foreign Exchange Management Act (FEMA). Entities who want to open BO in India need to apply to the Reserve Bank of India (RBI) in the prescribed format along with associated documents.
Eligibility Criteria prescribed by RBI for opening Branch Office:
The foreign entity must have a profit-making track record for the preceding five financial years in the home country.
Net worth should not be less than USD 100,000 or its equivalent.
Permitted activities of Branch Offices in India:
A branch office cannot carry out manufacturing activities. However, these activities can be sub-contracted to Indian manufacturers. The activities permitted for branch offices are enumerated below:-
Export / Import of goods
Carrying out research work in which the parent Company is engaged
Rendering professional or consultancy services
Promoting technical or financial collaborations
Representing the parent Company in India and acting as buying/selling agent
Rendering services in IT
Providing technical support to the products supplied by the parent Company
Airline / Shipping
Automatic Route:
If the principal business off foreign entity falls under sectors where 100% FDI is allowed, AD Category-I bank may consider such applications under delegated powers.
Approval Route:
If principal business falls under sectors where 100% FDI is not allowed. In such cases, applications are considered by RBI in consultation with Ministry of Finance, Govt of India.
