Govt. Tightens FDI Rules for Land Border Countries

Press Note No. 2; Dated: 15.03.2026

1. Background and Context

The Government has reviewed Para 3.1.1 of the Consolidated FDI Policy of 2020, dated 15.10.2020. This provision governs foreign direct investments originating from countries that share a land border with India.

2. Key Amendments to the FDI Policy

2.1 Prior Government Approval for Change in Beneficial Ownership

As per the amended policy, any subsequent change in beneficial ownership of an investment made by an entity from a land-bordering country will now require prior Government approval. This marks a significant tightening of oversight, ensuring that indirect shifts in control or ownership do not bypass the approval framework applicable to such investments.

2.2 Alignment of ‘Beneficial Ownership’ with PMLA, 2002

The definition of ‘beneficial ownership’ has been formally aligned with the definition as provided under the Prevention of Money Laundering Act (PMLA), 2002. This alignment brings consistency between foreign investment regulations and anti-money laundering frameworks.

3. Determination of Beneficial Ownership

3.1 Applicable Legal Framework

Beneficial ownership must be determined in accordance with the criteria specified under Rule 9(3) of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules, 2005).

3.2 Significance of Rule 9(3)

Rule 9(3) of the PML (Maintenance of Records) Rules, 2005 lays down the threshold-based criteria for identifying beneficial owners in the context of entities such as companies, partnerships, and trusts. By anchoring the FDI policy definition to this rule, the Government ensures a uniform and legally precise standard for identifying ultimate beneficial ownership across regulatory domains.

4. Implications of the Amendment

The amended policy has the following key implications:

• Investments from land-bordering countries are subject to enhanced scrutiny not just at the entry stage but also upon any downstream change in beneficial ownership.
• Entities holding such investments must monitor and report changes in beneficial ownership and seek prior approval before any such change takes effect.
• The alignment with PMLA definitions reduces regulatory ambiguity and strengthens the anti-circumvention framework applicable to sensitive cross-border investments.

5. Effective Provision

The amendment applies to Para 3.1.1 of the Consolidated FDI Policy, 2020, dated 15.10.2020, and governs all investments from countries sharing a land border with India, including any structural or ownership changes post-investment.

Click Here To Read The Full Press Release