REGULATORY · INDIA
Union Cabinet eases FDI rules for land-border countries
Change
On March 10, 2026, the Union Cabinet amended Press Note 3 (2020) to add a beneficial-ownership test and allow companies with non-controlling stakes held by entities from countries sharing a land border with India to invest without prior government approval.
Why it matters
Press Note 3 (2020) previously required government approval for investments by entities from countries sharing a land border with India. The amendment incorporates a beneficial-ownership provision into the FDI guidance. The amended guidance specifies that companies with non-controlling stakes held by entities from those countries can invest without seeking prior government approval. The 2020 rule had expanded prior-approval requirements beyond Bangladesh and Pakistan to other land-border countries.
Implications
- • FDI screening will focus on beneficial ownership and control thresholds rather than nationality alone.
- • Investments where land-border-country entities hold non-controlling stakes will not require prior-government clearance.
- • Investments meeting controlling or beneficial-ownership criteria will continue to require government approval.
- • Recipient companies will need to document ownership and control to establish whether prior approval is triggered.
Who is affected
- • Foreign investors from countries sharing a land border with India
- • Indian companies receiving foreign direct investment
- • Government FDI screening and approval authorities
- • Corporate compliance and legal teams handling FDI
Source
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