Wherever the BO or PO is required to remit funds outside India, within the applicable guidelines under FEMA, they may do so not necessarily through the designated AD Category I bank but through any AD Category I bank of its choice subject to obtaining no objection certificate (NOC) from the designated AD Category I bank. The remittances have to be for transactions settling on Cash / Tom / Spot basis only. The remittance has to be through banking channel in either of the two methods:
(1) The designated AD category I bank will transfer equivalent INR amount to the transaction handling bank. The transaction handling bank can remit the amount to the overseas parent office of BO / PO through SWIFT. However, the transaction handling bank will have to ensure KYC compliance and the necessary documentation. It will also be required to share the SWIFT message along with the details like UIN No, beneficiary and remittance details with the designated AD category I bank.
(2) The designated AD category I bank will transfer equivalent INR amount to the transaction handling bank. The transaction handling bank will then credit the NOSTRO account of the designated AD Category I bank which in turn will remit the amount to the final beneficiary.
- Delegation of Power to AD : Authorized Dealer Banks can now approve of application to set up LO / BO in India except in the following cases:
- The applicant is a citizen of or is registered/incorporated in Pakistan;
- The applicant is a citizen of or is registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau and the application is for opening a BO/LO/PO in Jammu and Kashmir, North East region and Andaman and Nicobar Islands;
- The principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information and Broadcasting. In the case of proposal for opening a PO relating to defence sector, no separate reference or approval of Government of India shall be required if the said non-resident applicant has been awarded a contract by/ entered into an agreement with Ministry of Defence or Service Headquarters or Defence Public Sector Undertakings. There shall be no requirement of any approval from RBI also only for such cases;
The applicant is a Non-Government Organisation (NGO), a Non-Profit Organisation, or a Body/ Agency/ Department of a foreign government.
However the AD bank has to report to the RBI regarding the receipt of application for further generation of UIN. Earlier permission from RBI was required to be taken for setting up a LO/PO/BO.
Certain other Rules and Procedures:
- Time Period: Validity for setting up of Liaison Office in the business of construction & development and Non-Banking Finance Companies (NBFCs) has been set for two years. The validity of setting up of LO in rest all of the cases is for 3 years. The validity of the PO is for the tenure of the project.
- Validity of Approval: After the approval, LO/PO/BO shall establish the office within six months. The approval shall elapse, in case the office is not set up in six months. Companies looking for any further extension of time shall require prior approval of RBI. Earlier there was no clarification on such time limit.
- Shifting of Office: AD banks are now authorized to grant approval to shift office to another city in India. In case the office change is within the same city, no such approval shall be required. Only filing of an intimation of the new address with the AD bank would be required.
- Name Change: AD bank may permit change in name of LO/BO/PO if there is no change in the ownership of foreign company. However, if the change in name is due to merger/acquisition/change in ownership of the parent company, then the closing of existing LO/BO/PO shall be required. Also, fresh approval would be required for the same.