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.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.
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.
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.