FDI Press Note 2 (2026): Revised Rules on Investors with Land-Border-Country Ownership

DPIIT issued Press Note 2 (2026 Series) on 15 March 2026, reviewing Para 3.1.1 of the Consolidated FDI Policy on investments from countries sharing a land border with India. It follows Cabinet approval announced on 10 March 2026.

Background

Under Press Note 3 (2020), an entity of a country sharing a land border with India, or where the beneficial owner of an investment is situated in or a citizen of such a country, could invest only under the Government route. Transfers of ownership resulting in beneficial ownership falling within that restriction also needed Government approval.

Key changes (per DPIIT and the Cabinet announcement)

• Beneficial owner defined: the term follows Section 2(1)(fa) of the Prevention of Money-laundering Act, 2002 and the criteria in Rule 9(3) of the PML (Maintenance of Records) Rules, 2005
• Test applied at investor-entity level: the beneficial ownership test is applied at the level of the investor entity
• Automatic route for limited non-controlling ownership: investors with non-controlling land-border-country beneficial ownership of up to 10% can invest under the automatic route, subject to sectoral caps, entry routes and conditions
• Reporting: such investments are subject to a reporting requirement in the format set by DPIIT
• Faster decisions in specified sectors: proposals in specified manufacturing sectors (capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer) are to be decided within 60 days, with majority shareholding and control remaining with resident Indian citizens or entities

Effective date

Press Note 2 (2026) states that the decision takes effect from the date of the FEMA notification. A PIB release dated 21 August 2026 states that the consequent amendment to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 was notified on 1 May 2026.

What this means for foreign investors

• Check the ownership chain of any investor entity, including indirect holdings, against the beneficial ownership criteria
• Confirm whether the investment is under the automatic or Government route for your sector
• Plan for the reporting requirement where it applies

Official sources

• DPIIT, Press Note No. 2 (2026 Series), 15 March 2026 (dpiit.gov.in)
• Press release, "Cabinet approves changes in guidelines on investments from countries sharing land border with India", 10 March 2026 (pmindia.gov.in)
• PIB, "Revised FDI Framework Facilitates Investment with Non-Controlling Beneficial Ownership from Land Bordering Countries", 21 August 2026

Advisory note: This summary reflects the official sources listed above. FDI policy and FEMA rules change, and sector-specific conditions apply. This is not legal advice; confirm the current position with qualified counsel and the official sources.