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Opening a bank account in India 

The Reserve Bank of India’s Know Your Customer Norms (KYC Norms) details the procedures that banks must follow while opening accounts. With the KYC norms as a foundation to secure against fraudulent and criminal activities, each bank may require mire documents and information as prescribed by the bank’s internal regulations for the opening of an account.

Opening a bank account for an individual

To open a bank account for an individual, their identity and legal name can be established by providing any of the following documents:

  • Passport
  • PAN (Permanent Account Number) card
  • Voter’s Identity Card
  • Driving License
  • Job Card issued by NREGA duly signed by an officer of the State Government
  • Letter issued by the Unique Identification Authority of India (UIDAI) containing details of name, address and Aadhaar number
  • Identity card (subject to the bank’s satisfaction)
  • Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of the bank 

The following are acceptable documents to verify the prospective account holder’s address:

  • Telephone bill
  • Bank account statement
  • Letter from any recognized public authority
  • Electricity bill
  • Ration card
  • Letter from employer (subject to satisfaction of the bank)
  • A rent agreement indicating the address of the customer duly registered with State Government or similar registration authority.

Opening a bank account for a proprietorship

In case of opening a bank account for a proprietorship firm – the name of the business, address, and activity of the business must be provided. Two of the following documents in the name of the proprietary concern must also be submitted.

  • Registration certificate (in the case of a registered concern)
  • Certificate/license issued by the Municipal authorities under Shop & Establishment Act,
  • Sales and income tax returns
  • CST/VAT certificate
  • Certificate/registration document issued by sales tax/service tax/professional tax authorities
  • A license issued by the registering/ regulatory/ statutory authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, etc.
  • Registration/licensing document issued in the name of the proprietary concern by the central government or state government authority/ department, etc.
  • Importer Exporter Code (IEC) issued to the proprietary concern by the office of Directorate General of Foreign Trade (DGFT) as an identity document for opening of the bank account.
  • The complete income tax return in the name of the sole proprietor where the firm’s income is reflected, duly authenticated/ acknowledged by the income tax authorities.
  • Utility bills, such as electricity, water, and landline telephone bills in the name of the proprietary concern.

Opening a bank account for a partnership firm

In case of opening a bank account for a partnership firm – the name of the partnership firm, legal name, address, names of all partners and their addresses, and contact numbers of the firm and partners must be provided. The following documents must also be submitted.

  • Registration certificate, if registered
  • Partnership deed
  • Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf
  • Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses
  • Phone bill in the name of firm/partners

Opening a bank account for a company

In case of opening a bank account for a company, the name of the company, principal place of business, mailing address of the company, and telephone number must be provided. The following documents must also be submitted.

  • Certificate of incorporation and Memorandum & Articles of Association
  • Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account
  • Power of Attorney granted to its managers, officers or employees to transact business on its behalf
  • Copy of PAN allotment letter
  • Copy of the phone bill 

Opening a bank account for a trust / society / foundation

To open a bank account for a trust/society/foundation – the names of the trustees, settlors, beneficiaries, and signatories, names and addresses of the founder, the managers/directors and the beneficiaries, and telephone/fax numbers must be provided. The following documents must also be submitted.

  • Certificate of registration, if registered
  • Power of Attorney granted to transact business on its behalf
  • Any officially valid document to identify the trustees, settlors, beneficiaries and those holding Power of Attorney, founders/managers/ directors and their addresses
  • Resolution of the managing body of the foundation/ association
  • Phone bill

Intellectual property protection

India has been a World Trade Organisation (WTO) member since 1995. WTO member nations must include some IP protection in their national laws. India is also a signatory to the following international IP agreements:

  • Paris Convention: Under this convention, any person from a signatory state can apply for a patent or trademark in any other signatory state and will be given the same enforcement rights and status as a national of that country would be.
  • Berne Convention: Under this convention, each member state recognizes the copyright of authors from other member states in the same way as the copyright of its own nationals.
  • Madrid Protocol: Under this convention, a person can file a single trademark application at their national office that will provide protection in multiple countries.
  • Patent Cooperation Treaty: This is a central system for obtaining a ‘bundle’ of national patent applications in different jurisdictions through a single application.

[tips title="Did You Know"]India is, however, not a signatory to the Hague Agreement, which would have enabled the protection of designs in multiple countries through a single filing.[/tips]

The following laws provide the legal basis for intellectual property protections in India and are periodically reviewed and amended as new technological developments and market reforms necessitate the case to be:

Patents

  • Laws and regulation – Patents Act, 1970; Patents (Amendment) Act, 2005; Patents Rules, 2003; Patent (Amendment) Rules, 2020
  • Relevant ministry – Office of the Controller General of Patents, Designs and Trade Marks (Indian Patent Office), Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and industry

Trademarks

  • Laws and regulation – Trademark Act, 1999; The Trade Marks (Amendment) Act, 2010; Trade Marks Rules, 2003; Trade Marks Rules, 2017
  • Relevant ministry – DPIIT, Ministry of Commerce and Industry

Copyrights

  • Laws and regulation – Copyrights Act 1957; The Copyright (Amendment) Act, 2012; Copyright (Amendment) Rules, 2021
  • Relevant Ministry – Copyright Office, Ministry of Human Resource Development

Industrial designs  

  • Law and regulation – Designs Act, 2000; Designs Rules, 2001; The Designs (Amendment), Rules, 2021
  • Relevant Ministry – DPIIT, Ministry of Commerce and industry

Geographical indications

  • Law and regulation – The Geographical Indications of Goods (Registration and protection) Act, 1999; The Geographical Indications of Goods (Registration and Protection) (Amendment) Rules, 2020
  • Relevant Ministry – DPIIT, Ministry of Commerce and industry

Latest IP reforms to ease doing business

Amendments to patent and trademark rules
  • Timelines are imposed for speedy disposal - number of adjournments has been limited in hearings.
  • Special provisions made for Start-ups & MSMEs.
  • E-filing encouraged through 10% rebate in fees.
  • Under Trade Mark Rules, 74 Forms have been replaced by 8 Consolidated Forms.
  • Hearing being done through video-conferencing facility.
  • E-mail as mode of service.
  • Procedural inconsistencies and unnecessary blocks in speeding up disposal removed by amendments.

Timelines for expedited examination

Examination of patent filings are expedited especially for applications by start-ups, female applicants, small entities, and applications pursuant to bilateral agreement with foreign patent offices etc.

Timeline details as mentioned below:

  • Examiner to give Examination Report to controller within one month, but not exceeding two months from date of reference by the Controller.
  • Response to First Examination Report (FER) within six months (with extension of three months).
  • Controller to dispose of the application within three months of the receipt of response from Applicant.

Location of main offices of regulatory bodies

The Office of the Controller General of Patents, Designs & Trade Marks (CGPDTM) is located at Mumbai, Maharashtra. It functions under the Department of Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce & Industry.

The Controller General supervises the working of the Patents Act, 1970, the Designs Act, 2000, and the Trade Marks Act, 1999 and also renders advice to the Indian Government on matters relating to these subjects.

The Head Office of the ‘Patent office’ is in Kolkata, the ‘Trade Mark Registry’ is in Mumbai, and the ‘GI Registry’ is in Chennai. The Offices of ‘The Patent Information System’ (PIS) and ‘National Institute of Intellectual Property Management’ (NIIPM) are at Nagpur.

[faq title="FAQ:What You Need to Know About Conducting Due Diligence in India"]

When should a foreign company conduct due diligence?

There are a couple of cases where a foreign company should conduct due diligence. If it is entering into a merger and acquisition (M&A), then due diligence should be conducted from the perspective of the buyer as well as the seller. It should also be conducted in case of a strategic alliance, business partnership, joint venture, or an IPO.

Due diligence is also conducted if the foreign company is interested in conducting background check of a personnel like a partner, supplier, or a country head.

Why should a foreign company conduct due diligence before entering into a business deal in India?

It is important to conduct due diligence to a avoid bad transaction, identify issues within the company, and verify that the business is what it appears to be. Further, through this process, information about the company’s value and assets is also revealed. It further helps in assessing the reputation and corporate governance of the company.

What are the types of due diligence that foreign companies should consider while investing in India?

Major types of due diligence in India are legal, financial, HR, and commercial. Legal due diligence focuses on examining the legal basis of the transaction. It requires
a thorough analysis of the documents, company’s existing contracts, agreements, ongoing and pending litigation, etc.

During the time of investment, it is important to understand the past financial statements, book of accounts, and compliance adherence. This helps to provide a thorough understanding of
company’s financial health including any hidden liabilities and their future impact on business.

Typically considered a ‘soft’ concern, HR due diligence has an expanded scope in India. It constitutes understanding the country’s system of employment contracts, labor laws, labor relations, regulatory policies, work culture, and industry standards. Identity markers such as class, caste, gender, ideology, religion, and tribe, among others, greatly influence labor relations in any of India’s distinct regions and must be fully understood prior to market entry.

Commercial due diligence assists in understanding the market of the target company. It provides a full overview of the target’s internal and external environmental factors. It highlights the position of the target company in the market and its ability to reach the forecast goals and objectives.

Other types of due diligence assist in understanding the areas such as operations, information technology, intellectual property, and vendor relationships, among others.

How important is it for firms to conduct pre-investment due diligence?

Pre-investment due diligence is a process to mitigate risks and to aid sound decision making. It helps in minimizing the extent of unknown risks or liabilities about a business. It helps in raising the red flags before a deal goes through and consequently adjust the price and other important terms and conditions of a deal. It also assists in gaining a complete picture of the business and checking the synergy with existing business. Thus, giving practical insights on doing business in India.

Based on the result of due diligence process, parties can either go ahead with the deal, negotiate further, or walk away.

Should due diligence be limited to certain types of business dealings?

While due diligence is advisable in several cases, it is an important part of the joint venture process. As no two companies are same, it is important to obtain and unveil any information that can have an impact on the sale and purchase of a company or its assets.

However, the necessity to carry out a due diligence can at times be dependent on the structure of a joint venture. If two companies are merging to form a new third company for carrying out a new business activity, then due diligence may or may not be required.

On the other hand, if the joint venture results in acquisition of an existing company then a due diligence is always recommended.

What areas of tax and regulatory compliance come under a due diligence check? What should foreign companies prioritize in India?

Conducting tax due diligence during an M&A deal is important as it helps in uncovering tax issues and leakages. At times, tax due diligence may also help in unveiling potential tax benefits which the target company is not availing.

Understanding the tax nuances also helps in structuring the M&A deal in an overall tax efficient manner.

Balance sheet, related schedules, and profit and loss statements assist in capturing the relevant tax information of the target company.

Such documents reveal aggregate taxes paid, current tax charge, and deferred tax charge for the relevant year. Financial statements also disclose tax disputes, demands against the company, contingent liabilities, among other important details.

It is also advisable to conduct analysis of effective tax rate, deferred tax rate, and review of MAT status. Master data from the corporate affairs ministry is analyzed to review details of the target company established under the Companies Act, 2013. Information contained in certificate of incorporation, articles of association, memorandum of association, authorized capital, paid-up capital, quantum of secured loans can give a good overview of the status of the company during the due diligence process.

During the M&A, it is important to make sure that the target company is in compliance with the FDI policy of India. Investment in certain sectors and activities is prohibited or limited by the FDI policy. Compliance with Foreign Exchange Management Act (FEMA) is also mandatory. Compliance with annual return on foreign liabilities and assets (FLA Return), annual performance report helps in shedding light on assets and liabilities of the company and if any overseas direct investment has been made.

Why is it important for foreign companies to conduct HR due diligence in India?

: It is important to conduct HR due diligence to correctly evaluate the overall HR procedures, processes, and human capital in a company. Such type of due diligence helps
in understanding:

  • HR policies, governance, and code of conduct guidelines;
  • Any cultural differences between organizations which may result in a conflict in future;
  • Payroll contractual obligations of the target company with its resources. Analyzing salary structures, cost to company details, lock in periods, no compete contracts, and severance package;
  • Potential frauds in background details of employees;
  • Labor issues, social security obligations and labor compliance status;
  • Relationship with trade unions and bonding among the workmen; and
  • Pending litigation against employees or company.

Why is it advisable to employ a local professional services firm for conducting due diligence?

If you are planning to invest in a business in India, then it is advisable to conduct a thorough due diligence of the target company to identify potential risks and opportunities well in advance. A seasoned due diligence team assists in making the right decision and ensures no checkbox is left unticked. Dezan Shira & Associates is well equipped to assist in your due diligence requirements.

Our team of experts and associates have deep understanding of India’s unique challenges and can provide comprehensive support in undertaking financial, legal, tax, vendor, HR, commercial, and any other type of due diligence undertaking required.

For advice on doing business in India and exploring your investment options in this market, please feel free to email us at india@dezshira.com.

[/faq]

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