As provided in Rule 5 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, prior approval of the Reserve Bank of India (RBI) is required for drawing foreign exchange for remittance for purchase of a trademark or franchise in India.
With a view to liberalizing the procedure and providing greater flexibility to current account transactions, the provisions with respect to prior approval of the RBI for remittance for purchasing a foreign trademark or overseas franchise for use in India, has been done away with.
This relaxation of the RBI norms would serve as an incentive to Indian corporates desirous of acquiring and utilizing overseas brands and its right to exploit their operations in India.
Interestingly, no parameters have been laid down for purchase of the franchise or trademark.
Further, this policy decision of the RBI could lead to an influx of foreign brands and trademarks into India and an expansion of the opportunities available to domestic corporates in a variety of market segments including but not limited to retail, pharmaceuticals and financial services to purchase brands and trademarks of overseas companies.
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