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The Reserve Bank of India today allowed insurance companies incorporated outside India to establish liasion offices in India.
However the permission has been granted to only those insurance companies, which had obtained prior approval from the Insurance Regulatory and Development Authority for establishing offices in India.
The permission is granted under the provisions of Foreign Exchange Management Act 1999.
Under the prescribed guidelines, the liasion office will restrict itself in conducting the activity for which it has been granted RBI/Irda approval and take prior permission of the regulators for undertaking any new activity.
It cannot enter into any business contracts in its own name without prior permission of Irda/RBI, neither any commission or fees will be charged or any other remuneration could be received or income could be earned for services rendered by it in India, either directly or indirectly unless approved by the Irda.
The liaison office in India shall furnish to the Irda, on an annual basis, a certificate from the auditor stating that the Office has complied with the terms and conditions stipulated in the letter of approval issued by the Irda/RBI and that all the expenses are met by way of approved means.
The activities/affairs of these offices could be verified by Irda/RBI/ Government of India by carrying out a scrutiny as and when necessary.
The entire expenses of the liaison office in India will be met exclusively out of the funds received from abroad through normal banking channels and so the office will neither borrow or lend any money from/to any person in India nor accept deposits in India.
It will not acquire, hold, (otherwise than by way of lease for a period not exceeding five years) transfer or dispose of any immovable property in India without obtaining prior permission of the RBI under the FEMA (Acquisition and Transfer of immovable property in India) Regulations, 2000.
Irda will have to allow the closure of such office under intimation to RBI.