Setting up a liaison office in a sector in which 100% FDI is allowed under the automatic route requires the prior consent of the RBI
For the remaining sectors, RBI grants its approval after consultation with the Ministry of Finance. A liaison office acts as a representative of the parent foreign company in India. However, a liaison office cannot undertake any commercial activities and must maintain itself from the remittances received from its parent foreign company. The approval for setting up a liaison office is valid for 3 years. It is an option usually preferred by foreign companies that wish to explore business opportunities in India.
