To establish a project office in India, the foreign company must have secured a contract from an Indian company to execute the said project. It also has to fulfil the following conditions.
- the project is funded directly by inward remittance from abroad; or
- the project is funded by a bilateral or multilateral International Financing Agency; or
- the project has been cleared by an appropriate authority; or
- a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project.
However, if the above criteria are not met, the foreign entity has to approach the Reserve Bank of India, Central Office, for approval.
The RBI has a few other considerations:
AD Category – I banks can open non-interest bearing Foreign Currency Account for Project Offices in India subject to the following:
- The Project Office has been established in India, with the general / specific permission of Reserve Bank, having the requisite approval from the concerned Project Sanctioning Authority concerned.
- The contract, under which the project has been sanctioned, specifically provides for payment in foreign currency.
- Each Project Office can open two Foreign Currency Accounts, usually one denominated in USD and other in home currency, provided both are maintained with the same AD category–I bank.
- The permissible debits to the account shall be payment of project related expenditure and credits shall be foreign currency receipts from the Project Sanctioning Authority, and remittances from parent/group company abroad or bilateral / multilateral international financing agency.
- The responsibility of ensuring that only the approved debits and credits are allowed in the Foreign Currency Account shall rest solely with the branch concerned of the AD. Further, the Accounts shall be subject to 100 per cent scrutiny by the Concurrent Auditor of the respective AD banks.
- The Foreign Currency accounts have to be closed at the completion of the Project.
All new entities setting up Project Offices shall submit a report containing information, as per format prescribed in within 5 working days of the Project office becoming functional to the Director General of Police (DGP) of the state concerned in which Project office has established its office;
if there is more than one office of such a foreign entity, in such cases to each of the DGP concerned of the state where it has established office in India.