The Hindu : Business : RBI lists criteria for liaison offices

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Wednesday, May 07, 2008
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Business

RBI lists criteria for liaison offices

Special Correspondent

Seeks public comments by May 20

Unique identification number will be allotted
Profit-making track record in home country essential

MUMBAI: The Reserve Bank of India on Tuesday suggested that no extension would be considered for liaison offices of foreign entities which are non-banking finance companies (NBFCs) and those engaged in construction and development sectors.

“Upon expiry of the validity period, these entities have to either close down or be converted into a full-fledged joint venture (JV)/wholly owned subsidiary (WOS), in conformity of the extant foreign direct investment (FDI) policy,” the RBI stated in a proposed draft document on ‘Norms for branch or liaison offices in India by foreign entities’.

Requests for extension of liaison offices (other than those from entities in the insurance sector, NBFCs and construction and development sectors) would be submitted to the AD Category-I bank concerned under whose jurisdiction the liaison office or nodal office is located before the expiry of the validity of the approval. Applications from insurance companies will continue to be directly received and examined by the Insurance Regulatory and Development Authority (IRDA), as hitherto.

The AD Category-I bank should exercise due diligence in respect of the applicant’s background, antecedents of the promoter, nature and location of activity and sources of funds and also ensure compliance with Know-Your-Customer (KYC) norms.

In order to provide a uniform framework, a Unique Identification Number (UIN) would be allotted to both existing as well as the new branch or liaison office.

The eligibility criteria includes: For branch office — profit making track record during the immediately preceding five years in the home country; For liaison office — profit making track record during the immediately preceding three years in the home country.

For the purpose of seeking public comments, the RBI has placed on its website, both the draft circulars regarding delegation of powers for extension of validity period or closure of liaison offices of foreign entities in India and eligibility criteria and procedural guidelines for branch/liaison offices of foreign entities in India.

Comments on these can be sent to the Chief General Manager, Foreign Exchange Department, Reserve Bank of India, Central Office (FID), Central Office Building, 11th Floor, S.B.S.Marg, Fort, Mumbai-400001, or by FAX (Fax No. 022-2261 0623) or by e-mail latest by May 20.

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