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India Eases FDI Rules for Bordering Nations
17 Mar
Summary
- India amended FDI guidelines for countries sharing a land border.
- Definition of 'Beneficial Owner' is now formally defined.
- Investors with up to 10% non-controlling beneficial ownership are exempt.
India's Union Cabinet approved significant amendments on March 10th, revising foreign investment guidelines for nations sharing a land border. This crucial update formally defines 'Beneficial Owner,' adopting the interpretation previously used by market practitioners based on PMLA Rules.
Previously, under the Press Note 3 (2020 Series) regime, investments from land-bordering countries required prior government approval. This created ambiguity, particularly regarding beneficial ownership thresholds. The new rules now permit investors with up to 10% non-controlling beneficial ownership to use the automatic investment route.
This targeted fix aims to alleviate regulatory friction and unblock capital flows, particularly for global funds with passive or non-controlling LBC (Land Bordering Country) LP interests. The change is expected to bring greater predictability to India's investment framework for institutional investors and their counsel.
