Reserve Bank of India (RBI) issues draft regulations on establishment of branch or office in India by foreign entities

The Reserve Bank of India (RBI) has released Draft Foreign Exchange Management (Establishment in India of a Branch or Office) Regulations, 2025 (Draft Regulations) for public consultation, proposing a revised framework for foreign entities setting up operations in India.

Key changes proposed, inter-alia, include the following:

• Removal of financial eligibility criteria: The Draft Regulations remove the minimum net worth and profit track record requirements which are currently applicable for establishment of Branch Offices (BOs) and Liaison Offices (LOs).
• Single bank account for multiple projects: Currently, each project requires the establishment of a separate Project Office (PO), along with separate Foreign Currency (FCY) and INR bank accounts. Under the Draft Regulations, a single PO would be permitted to undertake multiple projects, thereby streamlining administrative and banking operations. Consequently, the PO would be permitted to maintain only one FCY and one INR bank account for all projects executed under its umbrella.
• Requirement for separate books of accounts for POs: The Draft Regulations introduce a requirement for POs executing multiple projects to maintain separate books of accounts for each project.
• Permissibility of activities redefined: The list of permissible activities would be replaced with a principle-based restriction stating that BO or PO may not undertake activities prohibited or under the approval route as per the Foreign Direct Investment (FDI) policy.
• Additional offices: Currently, entities are required to seek prior approval and submit a fresh Form along with justification for establishing each additional office. The Draft Regulations would allow a BO or office (including LO and PO) established in India to open additional places of business under mere intimation to its designated bank, significantly easing procedural requirements.
• Provision for conversion of office into branch: The Draft Regulations introduce a provision allowing an Entity Resident Outside India (EROI) to convert an existing office into a branch, subject to approval by the designated Authorized Dealer (AD) bank.
• Consolidated Annual Activity Reports (AAC): Entities operating multiple places of business in India would be required to submit a consolidated AAC covering all locations. Additionally, POs executing multiple projects concurrently would be required to include a list of ongoing projects along with the AAC, ensuring greater transparency and project-level visibility. A compliance mechanism would also be introduced, in cases of non-submission within the stipulated timeline, designated banks are required to follow up and may restrict transactions in the PO’s bank accounts if the AAC is not submitted within thirty calendar days after the deadline.
• Remittances during operations clarified: The Draft Regulations explicitly permits any remittances (including profit/ surplus) to the overseas head office during operations, subject to tax compliance and auditor certification—an expansion over the earlier focus on profit/surplus remittance only.
• Revised Unique Identification Number (UIN) allotment process: The process for allotment of UIN would be streamlined. AD banks would report establishment details post-approval, and RBI would allot the UIN based on submitted data, removing the earlier pre-approval requirement in cases which falls under automatic route.

Source: Press Release - 2025-2026/1232 of 3 October 2025 and Draft Notification No. FEMA 22(XX)/2025-RB of October 2025