"Any bank will do for your India subsidiary": What FEMA actually requires of your AD Category-I bank

Your Authorised Dealer Category-I bank is the regulatory gateway for every rupee of foreign investment. Choose badly and you will spend the next three years managing your bank instead of your business.

Legal basis: FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 (FEMA 395/2019-RB, as amended to June 2026); FEMA (Non-Debt Instruments) Rules, 2019, Rule 21 (pricing floor); FEMA 1999, s.13 (penalties); Companies Act, 2013, s.149(3) (resident director).

What the regulation actually says

All FDI reporting flows through the AD bank. Unless otherwise specifically stated, "all reporting shall be made through or by an Authorised Dealer bank" (FEMA 395/2019-RB). The company does not file to the RBI directly — it files via the AD bank, which acts as gatekeeper. A slow or inexperienced AD bank is, in practical terms, a slow compliance function.

Equity must be issued within 60 days of receipt — or the money goes back. "Equity instruments shall be issued to the person resident outside India making such investment within sixty days from the date of receipt of the consideration." Where they are not, "the same shall be refunded to the person concerned by outward remittance through banking channels" (with credit to a repatriable account as an alternative) within fifteen days after the sixty days expire (FEMA 395/2019-RB, Schedule I).

FC-GPR within 30 days of allotment. An Indian company issuing equity instruments reckoned as FDI "shall report such issue in Form FC-GPR, not later than thirty days from the date of issue of equity instruments" (FEMA 395/2019-RB, Reg. 4). Complete entity and portal registrations before the money arrives — companies routinely discover missing registrations on day 28 of a 30-day window.

FC-TRS within 60 days. "The form FCTRS shall be filed within sixty days of transfer of equity instruments or receipt / remittance of funds whichever is earlier" (FEMA 395/2019-RB, Reg. 4). The onus lies on the resident transferor/transferee (or the non-repatriable holder, as applicable).

FLA every year by 15 July. An Indian company that received FDI (or LLP with capital contribution) "shall submit form FLA to the Reserve Bank on or before the 15th day of July of each year," reckoned April to March (FEMA 395/2019-RB, Reg. 4).

Individual foreign investors have their own reporting line. "The designated Authorised Dealer Category I banks shall report to the Reserve Bank in Form LEC (IFI) the purchase / transfer of equity instruments by an individual person resident outside India" on stock exchanges (FEMA 395/2019-RB, Reg. 4). If the entry structure includes individual foreign shareholders and not only a corporate parent, the bank's familiarity with this format is a live question.

Delays cost a late fee; contraventions cost more. The person responsible for a delayed report "shall be liable for payment of late submission fee, as may be decided by the Reserve Bank" (FEMA 395/2019-RB, Reg. 5). Beyond reporting delays, contraventions of the Act, rules or conditions of authorisation attract penalty on adjudication "up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable," plus Rs. 5,000 per day for continuing contraventions (FEMA 1999, s.13).

The pricing floor. Shares issued to a non-resident must be at or above certified fair value ("issued by such company to a person resident outside India shall not be less than" the methodology-certified valuation) (FEMA NDI Rules, r.21). Obtain the valuation certificate before the remittance — allotting below the floor is a contravention no explanation cures.

Step-by-step: what to do

• Confirm AD Category-I status in writing — the branch onboarding you, not just the bank's logo. Some networks route FEMA work through designated branches only.
• Ask three diagnostic questions: how many FC-GPR filings this branch processed in twelve months; who the named FEMA officer is; what the internal turnaround commitment is for entity verification and FC-GPR certification.
• Complete portal and entity registrations immediately after incorporation — before money arrives.
• Pre-brief the remitting bank abroad — exact beneficiary details, the correct purpose code for equity capital, and a note that remitter KYC must reach the Indian AD bank. Purpose codes must match the intended use; capital arriving coded as fees cannot be allotted against without a corrective exercise.
• Obtain the valuation certificate before the remittance, from a Merchant Banker or Chartered Accountant using an internationally accepted methodology.
• Calendar both dates the day funds land: allot within 60 days of receipt (refund within 15 days after, if not issued); file FC-GPR within 30 days of allotment.
• Bundle the evidence — remittance proof, valuation certificate, board resolution, ROC allotment filing — once, for both the FC-GPR and the company secretary's file.
• Diarise the FLA for 15 July every year FDI sits on the books.

FAQ

Can we change our AD Category-I bank later?

Yes — there is no lock-in, but migration means handing over entity registrations and the full history of filings. Administratively tedious rather than legally difficult, which is why choosing well the first time matters.

Do we need an Indian-resident director to open the account?

"Every company shall have at least one director who stays in India for a total period of not less than" 182 days during the financial year (Companies Act, 2013, s.149(3); proportionate for a newly incorporated company). Banks will also KYC the directors and the foreign parent's ultimate beneficial owner.

For structure-specific advice, consult a Chartered Accountant and your AD bank before the first remittance.

---

See Also

• "Foreign-owned e-commerce companies can't hold inventory in India": What FDI Policy actually requires after Press Note 3 of 2026
• "Royalty to the parent is just an intercompany invoice": What FEMA and Indian tax law actually require
• "A virtual office is enough for our Indian entity": What MCA actually requires for a registered office