Restrictions & Provisions for FDIs from India’s bordering countries

  • April 05, 2023
  • Registrationwala
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The FIFP or the Foreign Investment Facilitation Portal puts various restrictions as well as provisions for Foreign Direct Investments or FDI from our land border countries. But such stipulations, good or bad, can vary on the regulations of the bordering country in question. To learn such provisions as per the RBI’s directives

 

Restrictions on Foreign Investments from  bordering Countries

RBI has issued specific restrictions on Foreign Direct Investment from the land-border countries of India. Some of them are detailed below. 

Specific FDI Approval requests

Suppose you wish to invite FDIs from land neighboring countries, such as Bangladesh and Pakistan. In that case, you must get prior Government approval for investing the received funds in the following sectors:

  • Defense
  • Space
  • Atomic Energy

The requisite fund-seekers must also get an additional security clearance from the Ministry of Home Affairs for investments from these countries. You will not get such clearance from the FIFP portal as of now.

Sectoral Restrictions for FDI Reception

In general, the FIFP portal prohibits Foreign Investment Approval for FDIs from land-bordering countries for sectors such as defense, space, and atomic energy. These sectors are of utmost importance to our nation’s security. Therefore, fund invites from these nations must have prior trade or MoU agreements on the ministerial level.

Capped Investments from the bordering Countries

The Central Government has capped the FDI amount from Bangladesh and Pakistan at almost 20% of the equity of the receiving Organization at our end. This way, through its Foreign Investment Approval regulations, the Government can regulate the incoming fund from the bordering nations.

Secluded Routes for FDIs from Bordering Nations

Investment from the land neighboring countries can be exercised on the Ministerial level only. Such clearance required approval from the Foreign Investment Facilitation Portal. It is a license-issuing subsidiary under the DPIIT, i.e., the Department for Promotion of Industry and Internal Trade.

However, such restrictions are subject to change with the changing FDI regulations. Therefore, investors interested in receiving FDIs from bordering countries must consult Legal Experts to gain a depthful understanding of the stipulated regulations.

 

Provisions for FDI Investments from bordering Countries

Along with the restrictions also come the provisions for Foreign Direct Investments. The FDI from our land border countries is detailed in the following sections:

No FDI Approval through Automatic Route

You can invite an FDI from our land border countries, excluding Bangladesh and Pakistan, under the automatic route facility. No prior government approval is needed for funds in most of the economic sectors of India.

Special FDI provisions for certain Industrial Sectors

For specific sectors in the Indian economy, such as Telecommunications and Broadcasting, the Central Government restricts FDIs from bordering countries to ownership restrictions. For instance, the foreign Investor must hold 49% or less of the equity share capital for fund transfer in the Indian Firm of the broadcasting domain.

Foreign Investment Facilitation Portal

The Foreign Investment Facilitation Portal, or FIFP, is a designated authority for processing multiple FDI proposals from our bordering countries. It is a Department for Promotion of Industry and Internal Trade subsidiary.

The FDI applicant must note that the FDI provisions for land neighboring states of India are subject to change. Therefore, investors interested in receiving FDIs from bordering countries must consult Legal Experts to gain a depthful understanding of the stipulated regulations. We will recommend FDI experts at Registrationwala. They are well-versed in the operating mechanism of the FIFP portal and other government agencies. Their experience can come in handy for you to receive the requisite Foreign Investment Approval from the Central Authority.  

 




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