A Liaison Office (LO) (also known as Representative Office) can undertake
only liaison activities, i.e. it can act as a channel of communication
between Head Office abroad and parties in India. It is not allowed to
undertake any business activity in India and cannot earn any income in
India. Expenses of such offices are to be met entirely through inward
remittances of foreign exchange from the Head Office outside India. The
role of such offices is, therefore, limited to collecting information
about possible market opportunities and providing information about the
company and its products to the prospective Indian customers. It is not
allowed to undertake any business activity or commercial operation in
India and cannot earn any income in India / raise invoices. The LO can
neither borrow nor lend money. The Unique Identification Number (“UIN”)
is to be quoted in all references made to the RBI by the LO / designated
LO can undertake the following activities in India:
- Representing in India the parent company / group companies.
- Promoting export / import from / to India.
- Promoting technical/financial collaborations between parent / group companies and companies in India.
- Acting as a communication channel between the parent company and Indian companies.
LO has to obtain permission from RBI. The application in form FNC
should be forwarded by the foreign entity through a designated AD
Category – 1 Bank (hereinafter referred to as “designated AD”) to the
RBI which will be considered by RBI under two routes:
- Reserve Bank Route: Where principal business of the foreign entity falls under sectors where 100% FDI is permissible under the automatic route.
- Government Route:
Applications from entities falling under this category and those from
NGO’s / NPO’s / Government Bodies / Departments are considered by RBI in
consultation with the Ministry of Finance.
In addition, the following eligibility criteria are also considered by RBI:
- Profit making track record of the foreign entity in its home country for the preceding 3 FYs for LO.
worth (paid up share capital + free reserves – intangible assets) of
USD 50,000/- for LO as per the last audited Balance Sheet.
prior permission of the Reserve Bank, no person being a citizen of /
registered in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China,
Hong Kong or Macau can establish in India, a LO in India.