Liaison Office in India by any Foreign Entity is established with the purpose to understand the Indian market that further aims to explore the potential business opportunity in the country. The office also aims to facilitate export and import activities and to improve the relations with the authorities and business communities. As Liaison Office doesn’t generate any income of its own, its expenses are to be met wholly through inward remittances from the parent company. Liaison Offices in India are also allowed to open non-interest bearing INR current account with Category-1 Banks in India.
Foreign entities looking forward to open Liaison Offices in India are required to submit the application in Form FNC with the relevant documents via an Authorised Dealer bank to General Manager, Central Office Cell, Foreign Exchange Department, Reserve Bank of India and New Delhi Regional Office.
Reserve Bank of India governs the establishment of Liaison Office in India along with the Ministry of Finance and also issues notifications time to time. Foreign Exchange Management Act, 1999, on the other side, frames the rules and regulations subject to the Liaison Offices.
A Liaison Office can be established in India through 2 routes namely RBI Route and Government Route. If the industry in which a foreign company operates comes in the industries as specified by the Foreign Direct Investment Policy for 100% automatic route of investment, it will be approved by RBI.
On the other side, if the industry in which a foreign company works doesn’t come in 100% automatic route and Non Profit and Non-Government Organization, RBI along with the confirmation of the Ministry of Finance, Government of India can approve the establishment of Liaison Office.
Ans: All the liaison activities have been permitted to Liaison Office in India. Thus, the Liaison Office can act as a communication channel between Head Office abroad and parties in India. It has to be taken care that this office cannot undertake any business activity in India and make money out of it. Apart from this, below mentioned are the activities that a liaison office can undertake
(a) Representing parent company / group companies in India
(b) Promotion of export / import from / to India
(c) Promotion of technical/financial collaborations between parent/group companies and companies in India
Ans: Foreign Insurance companies can set up Liaison Offices in India once the Insurance Regulatory and Development Authority (IRDA) give its approval. Foreign banks can also set up Liaison Offices in India after getting approval from the Department of Banking Operations and Development (DBOD), Reserve Bank of India.