The Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016 have been the governing framework for foreign entities establishing Branch Offices (BOs), Liaison Offices (LOs), Project Offices (POs), or other business entities in India. Now, the Reserve Bank of India, on 3rd October, 2025, published
Draft Foreign Exchange Management (Establishment in India of a branch or office) Regulations, 2025 proposing several clarifications, procedural updates, and operational guidelines to streamline and modernize the framework. The 2025 draft keeps the core eligibility and operational principles of FEMA 2016 but streamlines processes, strengthens reporting and compliance, formalizes closure and appeal mechanisms, and assigns explicit responsibilities to designated banks. It is designed to make foreign office establishment in India more transparent and accountable while retaining flexibility for business operations. Please see comparison below:
| Point of Comparison |
FEMA 2016 |
Draft FEM 2025 |
| Short Title & Commencement |
Full title includes branch office, liaison office, project office, or any other place of business |
Simplified title: “branch or office” |
| Definitions |
Detailed definitions for Branch Office, Liaison Office, Project Office, Site Office, Stand-alone basis; “foreign company” includes firm/association |
Defines Branch Office, Project Office (PO), EROI (Entity Resident Outside India)- excludes natural persons, Designated Bank; streamlined |
| Prohibition / Prior Approval |
PROI cannot establish BO/LO/PO without RBI approval; exceptions for banks, insurance, SEZ branches with 100% FDI |
EROI cannot establish branch or office without RBI approval; additional conditions: sectoral regulator, SEZ Act, FCRA compliance; legal consultancy prohibited; Offices (other than PO) cannot undertake commercial activity |
| Opening a Branch or Office |
Application via Form FNC to AD Category-I bank; validity for 6 months; extensions allowed; additional offices require fresh application; POs require contract/funding |
Application via Form FNC to AD bank (Designated Bank); RBI issues UIN; conversion, name change, ownership/control, additional projects require approval; prior Government approval in sensitive cases; Nodal branch concept for multiple offices |
| Bank Accounts |
BO/PO accounts with AD banks; separate accounts for projects; fund/non-fund-based facilities; remittance of profits allowed |
BO/PO accounts with Designated Bank; INR current accounts and foreign currency accounts for PO; term deposits up to 6 months; change of designated bank procedure; PO maintains separate accounts per project |
| Additional Place of Business |
Allowed with justification; fresh FNC for additional BO/LO |
Allowed under intimation to designated bank; Nodal branch/office designated for compliance of all offices |
| Registration with State Police Authorities |
Certain nationalities required to register |
Same nationalities |
| Annual Activity Certificate (AAC) |
Submitted by 30 September for March year-end; project offices submit to AD bank |
Submitted within 6 months of financial statements; combined AAC for multiple offices; POs executing multiple projects submit project list; AD bank can restrict transactions if AAC not submitted on time |
| Closure of Branch or Office |
Closure via AD bank; auditor certificate; ROC report; RBI can direct closure; appeal to RBI |
Closure under intimation to Designated Bank; AAC non-submission for 3 years triggers closure; RBI may direct closure; appeal mechanism with 45-day filing and 90-day decision timeline |
| Remittance / Winding-up Proceeds |
Remittance of profits net of tax with CA certificate; winding up proceeds with auditor certificate; compliance with laws |
Same; adds verification by designated bank; ROC closure certificate; regulator approval if applicable; bank account closure reporting to RBI |
| Reporting Requirements |
Establishment and closure of BO/LO/PO reported by AD banks; sensitive entities require RBI forwarding |
All establishments and closures reported via Annex B by designated bank; entities under provisos also reported; UIN allocation clarified |
| Directions to AD Bank |
AD banks must follow RBI instructions |
AD banks explicitly directed under FEMA Section 11 to implement checks and balances; responsible for compliance oversight |
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