Amendment to Press Note 3 (2020): Streamlining FDI from Land Border Countries

The Union cabinet has endorsed amendments to the Foreign Direct Investment (‘FDI’) policy applicable to investments originating from countries sharing a land border with India (‘LBCs’) by virtue of notification issued by press information bureau dated 10^th March 2026.

These amendments build upon the regulatory framework introduced through Press Note 3 (2020). In April 2020, the Government of India issued Press Note 3 (2020) to amend the FDI policy in order to prevent opportunistic takeovers of Indian companies during the economic disruption caused by the COVID-19 pandemic. The amendment required prior Government approval for investments from entities or beneficial owners located in countries sharing a land border with India, including transfers of existing or future FDI resulting in a change of beneficial ownership.

Key changes of the Amendment

1. Alignment of Beneficial Ownership Definition

The policy now adopts the beneficial ownership thresholds under the PML Rules, 2005 to determine whether an investment originates from a LBC’s. This alignment aims to:

• Bring regulatory consistency across financial and investment regulations.
• Provide clearer criteria for determining indirect ownership structures.

2. Automatic Route for Limited Non-Controlling Investments

Under the revised framework:

• Investments from LBC’s up to 10% non-controlling beneficial ownership may now be permitted under the automatic route, subject to applicable sectoral caps and conditions.
• However for such investment the investee company must report to the Department for Promotion of Industry and Internal Trade (‘DPIIT’).

3. Faster Government Approvals in Priority Manufacturing Sectors

The policy introduces expedited approval timelines i.e. within 60 days for investment proposals in certain strategic manufacturing sectors, including:

• Capital goods
• Electronic capital goods
• Electronic components
• Polysilicon and ingot-wafer supply chains

The Cabinet Secretariat will have the authority to modify or expand this list of priority sectors where necessary.

In this case, majority shareholding and control must remain with resident Indian citizens or Indian entities owned and controlled by resident Indians.

Key Impact:

The revised policy is expected to bring several benefits:

1. Greater clarity and ease of doing business in India by clarifying beneficial ownership thresholds
2. Increased the inflow of foreign direct investment into India, particularly from global investment funds.
3. Enhance access to new technology, develop domestic value-added products and services, grow their business in India, and link their businesses with global supply chains.
4. Strengthened support for the Government’s “Atmanirbhar Bharat” initiative and domestic manufacturing growth.

Source:

Press Information Bureau, ‘Cabinet approves changes in guidelines on investments from countries sharing land border with India’, dated: 10 March 2026. The link for official notification is provided below:

https://www.pib.gov.in/PressReleasePage.aspx?PRID=2237806&reg=3&lang=2