India relaxes FDI restrictions for land border sharing countries

In a welcome move, the government of India has approved amendments to the extant Foreign Direct Investment policy (“Policy”) aimed at easing investments from land border sharing countries (“LBC”).

Under the erstwhile policy framework, any investment into India by an entity incorporated in an  LBC, or any investment into India where the beneficial owner is located in or is a citizen of such a country, could be made only through the government approval route. This restriction was introduced in 2020 vide the Press Note 3 (“PN3”) as a safeguard against opportunistic takeovers or acquisitions of Indian companies in light of the COVID-19 pandemic.

The Union Cabinet has now approved revisions to the policy and introduced a defined ‘beneficial ownership’ test to be applicable to the investor entities. The applicable thresholds align with the definition of beneficial ownership under the Prevention of Money Laundering Rules, 2005. In terms of the revised policy, investors from LBCs, with non-controlling beneficial ownership of up to 10% shall now be permitted to invest in India under the automatic route, and in accordance with applicable sectoral caps, prescribed entry routes, and other attendant conditions as prescribed under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (“NDI Rules”). Such investments shall also be subject to reporting of relevant information by the investee entity to the Department for Promotion of Industry and Internal Trade (“DPIIT”).

Further, the revised policy introduces a fast-track approval mechanism for certain investments from LBCs that fall outside the scope of the aforementioned permissible investment and pertain to specified sectors. Proposals for LBC investments in specified manufacturing sectors, namely, capital goods, electronic capital goods, electronic components and polysilicon and ingotwafer, will now be processed and decided within 60 days, thereby expediting the investment process in capital-intensive and technology-heavy segments that are critical to strengthening India’s manufacturing ecosystem and supply chain capabilities. The Committee of Secretaries under the Cabinet Secretary has been empowered to revise the list of specified manufacturing sectors from time to time.  In such cases of LBC investment, the majority shareholding and control of the investee entity must remain with the resident Indian citizens and/or resident Indian entities owned and controlled by resident Indian citizens, at all times.

Overall, the policy revision is expected to promote ease of doing business in India while maintaining appropriate safeguards. By allowing investments from LBC investors with non-strategic and non-controlling stakes, the government aims to facilitate greater foreign capital inflows while preserving national economic and strategic interests.

While the above analysis is based on a Press Information Bureau release dated March 10, 2026, an official press note by the DPIIT and the corresponding amendment to the NDI Rules under FEMA are still awaited for the policy's implementation.

About the authors: Dipak Rao is a Senior Partner and Nishita Arora is an Associate at Singhania & Partners.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

If you would like your Deals, Columns, Press Releases to be published on Bar & Bench, please fill in the form available here.