i) In terms of Section 29(1)(a) of FERA 1973, foreign companies and foreign nationals (whether resident in India or not) are required to obtain permission of Reserve Bank to carry on in India, any activity of a trading, commercial or industrial nature or to establish in India, a branch, office or other place of business for carrying on such activities. Application for permission should be made to the Central Office of Reserve Bank (Foreign Investment Division) by Foreign Companies in form FNC 2 and by foreign nationals in form FNC 3.

NOTE:

A. Reserve Bank has by its Notifications No.F.E.R.A.22/74-RB dated 11th October 1974 and No.F.E.R.A.202/99-RB dated 15th April 1999 under Section 29(1) of the Act has granted general permission to shipping and airline companies respectively, incorporated outside India for carrying on their normal commercial activities through local agents provided such companies do not have a branch, office or other place of business in India.

B. See paragraph 11A 12 for details regarding exemption granted to foreign nationals of Indian origin permanently resident in India.

(ii) Foreign companies engaged in manufacturing or trading activities will be permitted to
open branches in India for the following purposes:

(a) To represent the parent company/other foreign companies in various matters in India, e.g., acting as buying/selling agent in India,

(b) To conduct research work in which the parent company is engaged provided the results of the research are made available to Indian companies,

(c) To undertake export and import trading activities, and

(d) To promote technical and/or financial collaborations between Indian companies and overseas companies.

Applications for opening of branches in India for the above purposes should be made to the Central Office of Reserve Bank (Foreign Investment Division) in form FNC 4.

(iii) Foreign companies intending to set up a liaison office in India or to post a representative in India for undertaking liaison activities on behalf of the parent company or foreign trading companies intending to set up liaison offices in India for promotion of exports from India should submit their applications in form FNC 5 to the Central Office of Reserve Bank (Foreign Investment Division). In approved cases, permission is granted initially for a period of 3 years subject, inter alia, to the condition that the expenses of the liaison/representative office are met exclusively out of inward remittances. Applications for renewal of permission should, however, be made to the concerned regional office of Reserve Bank under whose jurisdiction the office is situated.

(iv) Applications for opening temporary project/site offices in India by foreign companies proposing to engage in execution of specific projects/contracts undertaken with the approval of Government of India/Reserve Bank should be submitted in form FNC 5 to the concerned regional office of Reserve Bank under whose jurisdiction the office will be situated.

(v) In terms of Section 29(2)(a) of the Act, it was obligatory for foreign companies/foreign nationals who were carrying on trading, commercial or industrial activities in India as on 1st January 1974 to apply to Reserve Bank for permission to continue their activities in India. Applications received from companies/persons were dealt with by Reserve Bank in terms of the Guidelines framed by Government of India for the purpose.

(vi) Authorised dealers may open QA 22 accounts in the names of Liaison Offices in India of foreign companies after verifying the relative approval granted by Reserve Bank under Section 29(1)(a) of FERA 1973.These accounts should be non-interest bearing and should be funded exclusively by way of inward remittances through normal banking channel. Authorised dealers may also allow credits in these accounts of refunds/claims received from various Government Departments/Municipal authorities, Insurance companies, refunds of security deposits on termination of lease of immovable property, etc. provided the original payment relating to the transaction was made from the QA 22 account.after verifying the original claim,refund order received from the Government Department/Municipal Authorities/Insurance Company/Utility Company etc. In case of refund of security deposit from the landlords, the Lease Agreement and correspondence leading to the termination of lease agreement and refund of deposits may also be verified. Similarly , authorised dealers may also allow credit of sale proceeds of Indian branches/offices of foreign companies to their respective QA.22 accounts provided these amounts are less than the book value of the assets as certified by a Chartered Accountant and the assets were acquired by payment from QA.22 account.Authorised dealers should keep copies of documentary evidence so verified on their records for inspection by their internal auditors/Reserve Bank.

NOTE: Authorised dealers need not insist on documentary evidence if the amount of credit of refund/claim to QA 22 account does not exceed Rs.10,000.