DPIIT amends 'Press Note 3' to ease FDI norms for border countries

The government has amended Press Note 3 under the FDI policy, allowing investors from countries sharing land borders with India to hold up to 10 per cent non controlling stakes via the automatic route

The Department for Promotion of Industry and Internal Trade (DPIIT) issued a notification easing foreign direct investment (FDI) norms while maintaining a close eye on the ownership structures of entities investing in the country, especially from China and other countries that share land border with India.

 

According to the Press Note 2 (2026) issued by DPIIT on March 15, the government has allowed investors from landborder countries holding up to 10 per cent non-controlling stakes under ‘automatic-route’ or without government approval subject to sectoral caps.

 

However, such companies receiving the investment will have to report details to the industry department.

 

 

However, government approval for inbound investment will also be needed if an Indian company with existing foreign investment goes through transfer of ownership in the future and the new beneficial owner is from the land border country, including China.

 

The government also defined the meaning of ‘beneficial owner’ – an entity that controls the investment – in line with the Prevention of Money Laundering Act (PMLA). 

 

The changes have been made by modifying a paragraph in the Press Note 3 (2020) that was introduced six years ago to prevent opportunistic takeovers of Indian companies during the pandemic. According to Press Note 3, an investor from a land border country had to go only through the government approval route. Countries that share land borders with India include China, Bangladesh, Afghanistan, Nepal, Myanmar, Pakistan and Bhutan.

 

“The Government of India has reviewed Para 3.1.1 of the Consolidated FDI Policy Circular of 2020 dated 15.10.2020, as amended from time to time (FDI Policy) on investments from countries sharing land border with India as notified vide Press Note 3 (2020) dated 17.04.2020,” according to the Press Note 2 (2026 series).

 

The changes will come into effect from the date of Foreign Exchange Management Act (FEMA) notification.

 

The Press Note 2 (2026) was issued after the Union Cabinet on March 10 announced easing restrictions on investments from countries sharing land borders with India, including China. It made two amendments – allowed investors from China and other land border countries holding up to 10 per cent non-controlling stakes under ‘automatic-route’ and introduced a definitive timeline for processing investment proposals in select sectors to boost domestic manufacturing.