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Journalism of Courage
The Reserve Bank of India (RBI) has included Hong Kong and Macau in the sensitive list of countries — along with Pakistan and China — that will require its prior approval to set up business or related activities in India.
“Accordingly, applications from entities registered in or resident of Hong Kong and Macau, for establishment of liaison, branch, project offices or any other place of business by whatever name called should require prior approval from RBI,” the central bank said. Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran and China are already in the sensitive list which means entities and residents of these countries will need prior RBI permission to establish a branch office or a liaison office or a project office in India.
Macau and Hong Kong are two Special Administrative Regions controlled by China. “Businesses in these two regions are mostly owned by the Chinese. They could easily come to India through their firms registered in Hong Kong or Macau,” said a banking source. Hong Kong, considered as a major financial centre in the world, is the Asian headquarters of many global funds and corporations. Many foreign funds, which operate in India, are controlled from Hong Kong and Singapore. Over a dozen Indian banks, including SBI, Axis Bank, ICICI Bank and PNB, have opened branches in Hong Kong.
According to the RBI, in Regulation 4 of the Foreign Exchange Management (Establishment in India of Branch or Office or Other Place of Business) Regulations, 2000, the words, “Iran or China” have been substituted by the words “Iran, China, Hong Kong or Macau”. This was done under the FEMA Act, the RBI said.
Entities from these countries are not allowed to acquire immovable property in India even for a branch office. They are allowed to lease property for a period not exceeding five years, according to the RBI.
