Ultimate Beneficial Ownership: Special Report
Opening a Company Bank Account in India: 10 Key Steps
India’s diverse and expanding economy, continues to attract many multinational companies across all major sectors. One of the basic and essential requirements for companies operating in India is to open a corporate bank account for their respective legal entities.
A bank account can be set up at one of the many private banks operating in India, as well as through the many international banks which have set up branch offices or subsidiaries there.
However, due to lengthy waiting times and a long-list of due diligence requirements, the process of opening an account in India can take as long as two months. In addition, companies are required to collate a host of different documentation, requiring separate notarizations and wet-ink signatures.
Here we provide 10 key steps to help streamline the process of opening a bank account in India.
1. Ensure you have the relevant Identification Numbers ready
Various Identification Numbers are needed to open a corporate bank account. If a company does not have one these identifiers, they will first be required to complete a separate application to the relevant authority.
Legal Entity Identifier (LEI) Number
- A LEI is a 20-digit code unique to a legal entity and provides basic information about the entity including name, address and entity type. A LEI code can be obtained online.
Permanent Account Number (PAN)
- A PAN is a unique 10-digit alpha-numeric code issued by the Indian Income Tax Department.
Tax Deduction and Collection Account Number (TAN)
- A TAN is a 10-digit alpha-numeric code issued by the Income Tax Department.
Global Intermediary Identification Number (GIIN)
- A GIIN is a 19-character identification number issued by the Foreign Account Tax Compliance Act (FACTA) Registration System.
2. Identify and collate the required corporate documents
It is important to note that the required documents will vary depending on the legal entity type registered in India.
The bank will provide an onboarding pack including a checklist for document preparation. The complete list of documents can vary from bank to bank depending upon their internal processes.
Documents can include:
- Certificate of Incorporation
- Memorandum of Association and Articles of Association or Constitution
- List of directors
- Copy of board resolution for opening a bank account or the certified extract of the Board Resolution for opening a bank account
- Proof of company address
- Government-issued proof of identity of the Directors (for example passport or Voter’s Identity card
- 2-year Financial Statements
- Structure Chart or Organizational Chart of the Entity
3. Verify directors’ proof of address and identity
In cases where the bank has no previous record of the directors, they will request Proof of Address and Proof of Identity.
Documents required to verify identity include passport or driving license. Documents required as address proof can also include utilities statements and bank statements.
4. Notarize foreign documents
All foreign documents will need to be notarized by a suitable certifier such as a Notary Public, Official of a Multinational Foreign Bank, Court Magistrate/Judge or the Indian Embassy/Consulate General in the country of the multinational.
‘Foreign documents’ includes corporate documents and any documents to verify proof of address and identity for directors.
5. Prepare an Anti-Money Laundering Letter
Anti-Money Laundering (AML) Regulations in India are governed by Prevention of Money Laundering Act (PMLA) which requires financial institutions and other entities to implement robust measures to detect and prevent money laundering activities.
An AML letter is a key compliance requirement that verifies the structure of the entity and confirms the entity has implemented and maintained an AML program ensuring continued compliance with the local laws and regulations.
6. Ensure any custody agreements and relevant POAs are in place
Execution of a Custody Agreement can take up to a week and requires an e-franking fee be paid to the bank.
In cases where a Power of Attorney (POAs) is required for account operations, then this will also need to be signed and notarized.
7. Execute documents via wet ink signatures
Documents can be shared with the bank in advance to double check they meet their requirements. Once the bank has confirmed that all documents are correct, documents can be sent to Company Directors for execution.
All documents must be signed with wet-ink signatures. The use of E-signatures are not accepted. Once the final documents have been signed (and notarized), they can be submitted to the bank.
8. The corporate bank account is opened
The bank will confirm they have received all signed and notarized documents. They will examine and begin the process of opening the account.
This typically takes two weeks and the bank will confirm once the account has been opened.
9. Set up an online account
Many banks offer online banking service portals for transactions. To activate those, various forms will be sent by the bank and these need to be filled in, notarized and sent back to the bank to check.
The bank will confirm if the forms are good for signature. Again, any required signatures for forms must be wet-ink.
10. Online bank account is activated
It typically takes two weeks for an online account to be activated, once the bank has confirmed they have received the completed forms with signature.
The Do’s and Don’ts in opening Bank Accounts in India
- Do make sure you have the relevant identifier/account numbers. These require separate applications with the relevant Indian authorities and you cannot open a bank account without them.
- Do give yourself plenty of time. Account openings can take up to two months due to the complexities of bank forms and due diligence requirements.
- Don’t use e-signatures. India requires wet-ink signatures for the Directors and Authorized signatories.
- Don’t forget that all foreign documents must be notarized. This is to certify their genuineness, prevent fraud and to make sure they are properly executed.
Conclusion
The complexity of the requirements and lengthy documentation list, can make opening a bank account in India an onerous task for many companies.
With a global perspective and local on-the-ground expertise, Mercator® by Citco is well equipped to help companies navigate these requirements, whilst also streamlining workflows and assisting with document preparation.
Farley Baciles
Legal Team Manager, Mercator by Citco, Citco International Support Services Limited – Philippine ROHQ
