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Foreign companies undertaking projects in India and satisfying prescribed requirements can set up POs for the purpose of executing the project.BO is permitted to undertake prescribed commercial activities and is generally suitable for foreign companies wanting to market/sell their products in India or IT Enabled/Consultancy Firms wanting to render services in India. The opening and operation of BO is regulated by the RBI on similar lines as that of LO including obtaining of a prior approval.However,the requirement of obtaining prior RBI approval for PO that meets specified conditions has been dispensed with. As clarified earlier, the PO can only undertake activities relating to and incidental to the execution of specific projects in India and has to wind up post the completion of the project.The activities permitted for a BO do not include manufacturing (unless setup in an Special Economic Zone which set-up and operation is governed under that separate regulations) and retail trading.

As per the Draft RBI circular referred earlier, the RBI has clarified its internal norms that the foreign entity proposing to set-up a BO in India needs to have a successful profit making track record during immediately preceding 5 years in the home country. Further, a net worth of not less than USD 100,000 is also required. Approval for a BO is location specific and various criteria apply to the same.