Setting up and running efficient bank account operations is one of the most critical steps for any foreign subsidiary operating in India. It’s not just about opening an account — it's about ensuring it aligns with regulatory compliance, cash flow management, and day-to-day business operations.
India’s banking landscape is highly regulated and governed by the Reserve Bank of India (RBI), especially for foreign companies. From FEMA (Foreign Exchange Management Act) guidelines to KYC norms and tax remittance compliance, foreign subsidiaries must navigate a structured process to open and operate bank accounts effectively.
Opening the Right Type of Account
Foreign subsidiaries generally need to open a current account with an Authorized Dealer Category-I bank. This allows them to receive foreign direct investment (FDI), make vendor payments, pay salaries, and manage operating expenses.
The account opening process requires several documents, including:
Certificate of incorporation
PAN (Permanent Account Number)
Address proof of the Indian office
Board resolution authorizing signatories
Foreign Inward Remittance Certificate (FIRC) for FDI inflows
KYC documents of directors and authorized signatories
Key Considerations for Smooth Operations
Multiple Authorized Signatories: Designate at least two signatories to avoid disruptions during travel or absence.
Digital Banking Access: Opt for a bank with a robust online banking platform that supports bulk payments, vendor transfers, and automated reconciliations.
Repatriation Mechanisms: Set up structures for easy repatriation of profits, subject to tax clearance and RBI norms.
Regular Bank Reconciliation: Align banking data with accounting software for transparent and real-time financial reporting.
Forex Management: Choose a bank that offers competitive exchange rates and treasury services for foreign currency transactions.
Managing Compliance & Reporting
Indian subsidiaries must comply with RBI reporting under FDI norms, submit annual returns via FC-GPR and FLAforms, and ensure timely TDS payments. Delays or non-compliance can attract penalties and affect future remittances.
Also, all foreign exchange transactions must be routed through designated bank accounts under FEMA guidelines. If a company receives investment from abroad, a timely filing of Form FC-GPR with RBI through the bank is mandatory.
Streamlining Daily Operations
To ensure operational efficiency:
Link GSTIN and PAN with the bank account
Enable auto-sweep for better idle fund management
Automate vendor and payroll payouts
Use real-time alerts and dashboards for better oversight
Schedule regular internal audits for banking transactions