Branch Office in India: Regulatory Framework, Eligibility & RBI's 2025 Draft Reforms

Branch Office Route Still Governed by 2016 Rules

India remains a magnet for multinational firms seeking a foothold in one of the world's fastest-growing major economies. Ministry of Corporate Affairs data shows roughly 5,302 foreign companies registered in India as of 31 December 2025, with 3,285 still active. For parents weighing an India entry strategy, the branch office (BO) remains an alternative to incorporating a wholly owned subsidiary.

A BO is an extension of the foreign company rather than a separate legal person, so the overseas parent stays directly liable for the Indian operation's obligations. Unlike a liaison office, which may only carry out representative, non-commercial work, a BO can earn revenue, raise invoices and sign contracts in India. That commercial freedom comes with direct tax exposure, and a BO is generally treated as a permanent establishment of the foreign entity.

Current Eligibility and Activity Limits

Approvals presently run through an authorised dealer (AD) category-I bank under the RBI framework. Applicants must generally show profits in the five financial years immediately preceding the application, hold minimum net worth of US$100,000 — computed as paid-up capital plus free reserves minus intangible assets — and propose activities aligned with the parent's core business overseas. Where the applicant cannot meet the financial thresholds on its own, a financially sound parent or group company may issue a letter of comfort.

Under FEMA, BOs may only conduct activities specifically permitted by the RBI, and certain activities are barred outright. Regulated sectors such as financial services, defence, telecom, media and insurance may need further governmental or sectoral clearances.

What the 2025 Draft Proposes

In October 2025 the RBI issued the Draft Foreign Exchange Management (Establishment in India of a Branch or Office) Regulations, 2025, for public consultation. The draft has not been notified, and the 2016 framework stays i…