A proposed Indian subsidiary cannot open or operate a bank account in its own name before it is incorporated. It becomes a separate legal entity only from the date stated in its Certificate of Incorporation.
However, the foreign parent company may, in appropriate cases, open an account in India in its own name, such as a Special Non-Resident Rupee (SNRR) account, if it satisfies the applicable Foreign Exchange Management Act (FEMA) conditions and the authorised dealer bank's KYC requirements. These are two legally different situations.
Why can't the proposed Indian company open an account before incorporation?
Because the proposed company does not yet legally exist.
Under Sections 7 and 9 of the Companies Act, 2013, the Registrar of Companies issues the Certificate of Incorporation, and from the date mentioned in that certificate the company becomes a body corporate capable of owning property, contracting and exercising the functions of an incorporated company.
Companies Act, 2013 — India Code
Before that date, there is no Indian company capable of being the legal holder of an ordinary corporate current account.
This is also consistent with RBI KYC requirements. For opening an account of a company, banks are required to obtain documents including the company's Certificate of Incorporation, memorandum and articles, PAN, board resolution/authority to operate the account and prescribed KYC information concerning authorised persons and beneficial ownership.
Accordingly, promoters should be cautious about anyone suggesting that a normal current account can simply be opened in the name of a proposed company before it legally exists.
But doesn't MCA allow a bank-account application during incorporation?
Yes. This is where much of the confusion arises.
The Ministry of Corporate Affairs requires new companies incorporated through SPICe+ (Simplified Performa for Incorporating Company Electronically Plus ) to apply for opening their company bank account through the linked AGILE-PRO-S process. MCA expressly describes AGILE-PRO-S as covering, among other registrations, the opening of a bank account, and says the form accompanies the incorporation application.
That does not mean that the proposed company becomes the owner of an operative bank account before incorporation.
The better way to understand the process is:
the bank-account application is initiated as part of the incorporation process;
the Registrar incorporates the company and issues its Certificate of Incorporation, CIN and related registrations;
the bank completes its account-opening and KYC procedures; and
the account is operated in the name of the now-incorporated company.
Therefore, applying for the account during incorporation is not the same as the company legally holding an account before incorporation.
Does share subscription money have to be deposited before incorporation?
Generally, the Companies Act does not require the proposed Indian subsidiary to have received its subscribers' share money into its own bank account before the Certificate of Incorporation is issued.
Instead, Section 10A of the Companies Act applies after incorporation to a company having share capital. Such a company cannot commence business or exercise borrowing powers until, among other things, a director files the prescribed declaration confirming that every subscriber to the memorandum has paid the value of the shares agreed to be taken.
The declaration must be filed within 180 days from incorporation.
For a foreign-owned subsidiary, the practical sequence will therefore commonly be:
Incorporation → bank account activation → foreign shareholder remits subscription money → applicable FEMA reporting → INC-20A compliance.
The exact foreign-investment procedure should be coordinated with the company's AD Category-I bank because FEMA requirements also apply.
Can the foreign parent itself open an Indian bank account before the subsidiary is incorporated?
Potentially yes.
Under India's foreign-exchange rules, a person resident outside India having a business interest in India may open a Special Non-Resident Rupee Account (SNRR account) with an authorised dealer for permissible transactions.
RBI's current FAQ describes an SNRR account as a non-interest-bearing rupee account available to a person resident outside India having a business interest in India for bona fide permissible transactions. Its permitted debits and credits must relate to the relevant business. The account is repatriable and its tenure is linked to the relevant contract, period of operation or business.
RBI — Accounts in India by Non-residents
This account belongs to the foreign company, however—not to the proposed Indian subsidiary.
Opening it is also not automatic. The AD bank must be satisfied about the foreign entity, its Indian business interest, intended transactions, source of funds and applicable KYC/FEMA requirements.
Can an SNRR account be used for pre-incorporation expenses?
It may be useful for permissible transactions, but the exact transaction should be cleared with the AD bank.
Importantly, RBI's current Master Direction on Foreign Investment in India expressly recognises pre-incorporation and pre-operative expenditure incurred by a non-resident parent.
For a qualifying wholly owned subsidiary, RBI states that pre-incorporation/pre-operative expenditure can include money remitted:
to the Indian investee company's account;
to the foreign investor's account in India, if one exists;
to a consultant or attorney; or
to another material or service provider for incorporation or commencement-related expenditure.
This confirms that Indian foreign-exchange rules contemplate circumstances in which the overseas investor itself already has an Indian account before the subsidiary begins operations.
Can the foreign parent recover pre-incorporation expenses through shares?
In certain cases, yes.
Under RBI's Foreign Investment Master Direction, a wholly owned Indian subsidiary may issue equity instruments to its non-resident parent against eligible pre-incorporation or pre-operative expenses where:
the Indian subsidiary operates in a sector permitting 100% foreign investment under the automatic route;
there are no FDI-linked performance conditions; and
the recognised expenses do not exceed 5% of the subsidiary's authorised capital or USD 500,000, whichever is lower.
The company must also comply with the prescribed FC-GPR reporting and auditor-certification conditions. RBI requires FC-GPR reporting within 30 days from the issue of the equity instruments and, for this particular pre-incorporation-expense route, no later than one year from incorporation.
This can be useful where the foreign parent has paid incorporation fees, professional charges, rent or other qualifying setup expenditure before the Indian subsidiary had its own operational account.
It should not, however, be treated as a general mechanism for capitalising every expense incurred overseas.
What if the foreign company wants a Branch Office, Liaison Office or Project Office instead?
A foreign company does not necessarily have to incorporate an Indian subsidiary to maintain an Indian banking relationship.
Subject to the applicable FEMA framework:
a Liaison Office may maintain the permitted account for remittances and approved local expenses;
a Branch Office may open an account for its permitted Indian operations; and
qualifying Project Offices may maintain accounts subject to the conditions prescribed by RBI.
RBI's Master Direction specifically contains separate account-opening rules for BOs, LOs and POs.
RBI — Branch, Liaison and Project Offices Master Direction
These structures are legally different from incorporating an Indian private limited subsidiary and should not be confused with an ordinary pre-incorporation bank account.
What documents will a bank normally require from the foreign parent?
Depending on the account and transaction, expect the bank to examine documents such as:
foreign Certificate of Incorporation or equivalent registration document;
constitutional documents;
board resolution or authority for opening and operating the account;
PAN where required;
documents of authorised signatories;
beneficial-owner information;
registered and principal business address;
proof of the proposed Indian business activity or transaction; and
source-of-funds information.
RBI's KYC Direction requires banks opening company accounts to verify legal existence, authorised persons and beneficial ownership.
For overseas documents, the bank may also require certification, notarisation, apostille, consularisation or other authentication depending on the originating jurisdiction and the bank's compliance process.
Are there additional restrictions based on the foreign investor's country?
Potentially yes.
Foreign investment into an Indian company remains subject to India's FDI entry route, sectoral caps and sector-specific conditions.
In addition, an entity from a country sharing a land border with India—or an investment whose beneficial owner falls within the relevant land-border restriction—requires the Government route under India's FDI policy.
There are also specific RBI restrictions concerning certain non-resident accounts. For example, RBI's SNRR guidance provides that opening SNRR accounts by Pakistan and Bangladesh nationals and entities incorporated in those countries requires prior RBI approval.
Bank-account eligibility and permission to make an FDI investment should therefore be checked separately.
What is the safest practical structure?
For most foreign companies incorporating a normal Indian wholly owned subsidiary, the cleaner sequence is:
1. Incorporate the Indian subsidiary.
Complete SPICe+, including the linked bank-account application.
2. Complete the bank's KYC process.
Provide the Certificate of Incorporation, PAN, corporate documents and foreign shareholder/beneficial-owner KYC.
3. Remit the foreign shareholder's subscription money through permitted banking channels.
Ensure that the remittance and investment comply with FEMA, the applicable FDI route and the company's constitutional documents.
4. Complete RBI foreign-investment reporting.
Subscription by a non-resident to the memorandum is recognised under RBI's foreign-investment framework and is permitted at face value, subject to the applicable entry route and sectoral caps. FC-GPR and other reporting requirements should be completed within the prescribed periods.
5. File INC-20A.
Ensure all subscribers have paid their agreed subscription amounts and complete the Section 10A commencement declaration within 180 days of incorporation.
An SNRR or other foreign-parent account should generally be used only where there is a genuine commercial need and the particular transactions are permitted by FEMA and accepted by the AD bank.
Frequently Asked QuestionsCan a foreign company open a normal current account for its proposed Indian subsidiary before incorporation?
No. The proposed subsidiary does not become a separate legal person until its Certificate of Incorporation takes effect. The account application may be initiated through AGILE-PRO-S, but the company itself cannot hold an operative account before it exists.
Can the foreign parent open its own account in India without incorporating a subsidiary?
Yes, in appropriate circumstances. An SNRR account may be available where the foreign entity has a bona fide business interest in India and the transactions comply with FEMA.
Is an SNRR account the same as an Indian subsidiary's current account?
No. The SNRR account belongs to the non-resident foreign entity and is restricted to transactions permitted under FEMA. A subsidiary's current account belongs to the separately incorporated Indian company.
Can the foreign parent pay incorporation expenses directly?
Yes. RBI's foreign-investment framework recognises qualifying pre-incorporation expenses paid to consultants, attorneys and other service providers.
Can those pre-incorporation expenses be converted into shares?
For a qualifying wholly owned subsidiary, certain expenses may be capitalised subject to RBI conditions, including the lower of 5% of authorised capital or USD 500,000 and prescribed reporting/audit requirements.
When must foreign subscribers pay their share subscription?
For Companies Act purposes, Section 10A requires every subscriber to have paid the value agreed to be taken before the commencement declaration is made, and that declaration must be filed within 180 days of incorporation.
Is FC-GPR required for the foreign shareholder?
Where the issue constitutes foreign direct investment, the Indian company generally reports the issue of equity instruments in Form FC-GPR within 30 days from the date of issue, subject to the applicable RBI reporting framework.
Does opening an SNRR account give permission to invest in India?
No. Bank-account eligibility and permission to make the underlying investment are separate matters. FDI sectoral caps, entry routes, government approvals and FEMA conditions must independently be satisfied.
Can a foreign company operate in India without incorporating a subsidiary?
Potentially yes, through structures such as a Branch Office, Liaison Office or Project Office where the applicable RBI/FEMA conditions are satisfied.
