What changed
RBI clarified that the delegation of powers to AD Category-I banks under the December 2009 circular does not include approval for transferring assets of liaison or branch offices to subsidiaries, other offices, or any entity. Such transfers now require explicit approval from the Central Office of RBI's Foreign Exchange Department.
What it means for you
Banks acting as AD Category-I must immediately stop processing any asset transfer requests from foreign BOs/LOs to related entities. All such applications must be forwarded to RBI's Central Office for approval, adding a layer of regulatory oversight and potential delays for foreign entities restructuring in India.
What you must do
- Inform your constituents and customers about this clarification immediately.
- Stop processing any asset transfer requests from foreign BOs/LOs to subsidiaries or other entities.
- Redirect all such applications to RBI's Central Office, Foreign Exchange Department for approval.
- Ensure your internal compliance teams update procedures to reflect this restriction.
Who it affects
AD Category-I banks, Foreign entities with branch or liaison offices in India, Customers of AD Category-I banks involved in foreign entity operations
Can AD Category-I banks approve asset transfers from a foreign branch office to its subsidiary?
No, this clarification explicitly states that such transfers are not delegated to AD Category-I banks and require specific approval from RBI's Central Office.
Does this circular change any other instructions from the December 2009 circular?
No, all other instructions from A.P. (DIR Series) Circular No.24 dated December 30, 2009 remain unchanged.
What legal authority does this circular have?
It is issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999, and is without prejudice to other applicable laws.