Changes in FDI Policy for Investments from Land Bordering Countries

• Manish Kumar
• 11 Mar 2026
• 58 Views

On 10 March 2026, the Union Cabinet led by Prime Minister Shri Narendra Modi gave the greenlight for changes in guidelines pertaining to investment from countries that share land border with India. The new guidelines are expected to offer clarity and boost ease of doing business in India. 

Amendments in FDI Rules

The existing rules have been reviewed and updated as follows:

• Incorporation of the definition and criteria for ‘Beneficial Owner’ determination:- The definition as well as criteria for determining a beneficial ownership is provided under the amendment. The beneficial ownership test will be applicable at the investor entity’s level. In accordance with the applicable sectoral caps, entry routes and attendant conditions, investors with non-controlling LBC Beneficial Ownership of up to 10 percent shall be permitted.  The investee entity must report relevant information of such investments to the DPIIT.

• Expedited Clearance for Investments in Certain Sectors:- Proposals for LBC investments in specified manufacturing sectors, including capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafers, will be processed and decided within 60 days. The CoS under the Cabinet Secretary may revise the specified sectors’ list. In these instances, majority shareholding and control of the investee entity must remain with resident Indian citizens and/or resident Indian entities that are owned and controlled by resident Indian citizens at all times.

Background

To address the risk of opportunistic takeovers and acquisitions of Indian companies due to the COVID-19 pandemic, the government of India had amended the existing Foreign Direct Investment (FDI) Policy via Press Note 3 (2020), issued on 17 April 2020 (PN3). According to PN3, any entity from a country that shares a land border with India, or where the beneficial owner of an investment in India is located or is a citizen of such a country, can only invest via Government route. 

Furthermore, any transfer of ownership involving existing or future FDI in an entity in India that results in the beneficial ownership falling within these jurisdictions also requires necessary approval from the govt. The restrictions outlined in PN3 have raised concerns as they may negatively impact investment flows from investors like global funds such as private equity and venture capital funds, particularly in cases where investors from land border countries may have only non-strategic, non-controlling interests.

Source: Press Information Bureau (PIB)