INTRODUCTION

In a long-awaited move, the Union Cabinet on 10 March 2026 approved amendments in the framework for foreign direct investment from countries sharing a land border with India (Land Bordering Countries). This framework had initially been introduced by way of Press Note 3 of 2020 dated 17 April 2020 (PN3 of 2020), in order to curb opportunistic takeovers / acquisitions of Indian companies during the COVID-19 pandemic.   
 

KEY CHANGES

• The definition and criteria for determination of ‘beneficial ownership’ under the Prevention of Money Laundering Rules, 2005 (PMLA Rules) will now be applicable for the purposes of PN3 of 2020.
• Investors having non-controlling beneficial ownership not exceeding 10 percent from Land Bordering Countries will no longer require prior approval under PN3 of 2020 for investment in Indian companies. Such investments will nevertheless continue to be subject to sectoral caps, entry routes and applicable conditions for foreign direct investment. 
• Proposals for investments in identified activities from Land Bordering Countries will be processed and decided on an expedited basis within 60 days. Such expedited clearance would however only be available where the majority shareholding and control of the target entity remains with resident Indian citizens / entities. The list of identified activities presently consists of manufacturing in capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer, and may be revised from time to time by the Committee of Secretaries under the Cabinet Secretary.  
   

TAKEAWAYS  
 

As of 11 March 2026, the formal amendments are still awaited, and are likely to be published by way of a press note by the Department for Promotion of Industry and Internal Trade (DPIIT). Corresponding amendments to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 are also awaited. 

PN3 of 2020 lacked clarity on how ‘beneficial owner’ was to be defined in the absence of any formal definition, and whether the definition under the PMLA Rules was applicable or if investors should follow the definition of ‘significant beneficial owner’ under the Companies Act, 2013. Introduction of a formal definition is therefore a welcome and long-overdue move.

   
While the stated objective of PN3 of 2020 was to curb opportunistic takeovers / acquisitions of Indian companies by Land Bordering Countries, the absence of a de minimis threshold impacted non-controlling financial investments as well^[1]. The government has acknowledged this issue, noting in its press release that applicability of restrictions to investments where investors from Land Bordering Countries may have only non-strategic, non-controlling interests was seen as adversely affecting investment flows from investors including global funds.  
 

Provision of an expedited 60-day clearance window should effectively halve the current approval timeline of 12 weeks for investments from Land Bordering Countries, in accordance with the standard operating procedure published by the DPIIT. However, given that in practice foreign investment clearances often exceed the timeline under DPIIT’s standard operating procedure, it remains to be seen how effective the expedited clearance window will prove to be.