New Delhi, Mar 16 (KNN) The Department for Promotion of Industry and Internal Trade (DPIIT) has eased foreign direct investment (FDI) norms for investors from countries sharing land borders with India while tightening oversight of ownership structures.
Under Press Note 2 (2026) issued on March 15, investors from neighbouring countries can now acquire up to 10 per cent non-controlling stakes in Indian companies through the automatic route, subject to sectoral caps and conditions. However, companies receiving such investments must report details to DPIIT.
Changes to Earlier FDI Restrictions
The move modifies provisions under Press Note 3 (2020), which required all investments from land-border countries to seek prior government approval.
The earlier rule was introduced during the COVID-19 pandemic to prevent opportunistic takeovers of Indian firms.
Despite the relaxation, government approval will still be required if the beneficial owner of an investment is from a land-border country or if there is a future transfer of ownership in an Indian company that results in such ownership.
Definition of Beneficial Ownership
The government has clarified the definition of ‘beneficial owner’ in line with the Prevention of Money Laundering Act, 2002 and related rules.
Investments will be treated as linked to a land-border country if citizens or entities from those countries hold rights above prescribed thresholds or exercise direct or indirect control over the investing entity.
Countries sharing land borders with India include China, Bangladesh, Afghanistan, Nepal, Myanmar, Pakistan and Bhutan.
Implementation
The revised provisions amend Para 3.1.1 of the Consolidated FDI Policy Circular of October 15, 2020, and will come into effect from the date of notification under the Foreign Exchange Management Act (FEMA).
The changes follow the Union Cabinet’s decision on March 10 to ease certain restrictions on investments from neighbouring countries while maintaining safeguards and introducing timelines for processing investment proposals in selected sectors to support domestic manufacturing.
(KNN Bureau)
