Procedure for a Foreign company to set up a Branch Office in India
Foreign companies can set up a branch office in India. But unlike the case of setting up a company, a branch office requires approval from the Reserve Bank of India (RBI). Only upon getting the branch license from RBI, the foreign company can commence the operations.
A branch office is suitable for a foreign company to test and understand the Indian market as it does allow the companies to just do the major activity. Any additional activity to be carried by the Branch office shall be illegal.
Approval from RBI for setting up branch offices is granted by the Foreign Exchange Department, Reserve Bank of India, Central Office in Mumbai.
Reserve Bank of India considers the track record of the applicant company, the activity of the company proposing to set up an office in India as well as the financial position of the company while scrutinizing the application.
The applications from such entities in Form FNC (Annex-1) will be considered by the Reserve Bank under two routes:
- Reserve Bank Route — Principal business of the foreign entity falls under sectors where 100% Foreign Direct Investment (FDI) is permissible under the automatic route.
- Government Route — Principal business of the foreign entity falls under the sectors where 100% FDI is not permissible under the automatic route.
- Applications from entities falling under this category and those from NGOs / Non – Profit Organizations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, Government of India.
