DPIIT Publishes Updated Standard Operating Procedure for Processing FDI Proposals Pursuant to Press Note 2 (2026 Series) on Investments from Land Bordering Countries

The Department for Promotion of Industry & Internal Trade (“DPIIT”), Ministry of Commerce & Industry, Government of India, has, vide office memorandum dated May 4, 2026, published the updated Standard Operating Procedure for Processing Foreign Direct Investment (FDI) Proposals (“Updated SOP”).

The Updated SOP has been issued pursuant to Press Note No. 2 (2026 Series) (“Press Note 2”) dated March 15, 2026, read with the Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2026 (“NDI Amendment Rules”) dated May 1, 2026, to provide guidelines on reporting relating to investments from countries sharing land border with India (“LBCs”).

The key aspects introduced under the Updated SOP in relation to LBC investments include, inter alia, the following: 

1. The NDI Amendment Rules stipulate that investments from an investor entity having any direct or indirect ownership by a citizen or entity of an LBC, but which do not require prior Government approval (i.e., where the cumulative LBC ownership at the investor level is below the applicable thresholds), shall be subject to reporting requirements specified by the RBI. The Updated SOP operationalizes this requirement and prescribes inter alia that:

• • The reporting requirements under Para 3.1.1(d) of the FDI Policy shall apply to transactions or investments into India from an investor entity having any direct or indirect ownership by citizen(s) or entity(ies) from LBC, where the cumulative ownership from an LBC at the investor level, is below the applicable threshold and satisfies the criteria stipulated under Section 2(fa) of the Prevention of Money Laundering Act, 2002 and Rule 9(3) of Prevention of Money-laundering (Maintenance of Records) Rules, 2005, and does not require prior government approval.

• • These guidelines are in addition to the existing reporting requirements under the Foreign Exchange Management Act, 1999 (FEMA) and applicable laws and do not replace, supersede or override the same.

• • The onus of reporting shall be on the Indian investee entity or resident Indian transferor/transferee, as the case may be.

• • The reporting entity shall submit the information/documents in the format prescribed under Schedule I of the Updated SOP to the DPIIT. Schedule I prescribes extensive documentation to be submitted including inter alia: (a) in relation to the Indian investee entity: incorporation details, registered office address, business activity/sector along with NIC code, shareholding pattern along with place of incorporation/citizenship of respective shareholders, etc.; and (b) in relation to the investor: incorporation details, registered office address, business activity/sector, shareholding pattern along with place of incorporation/citizenship of respective shareholders, beneficial owner(s) of the investor entity(ies) as per Rule 9(3) of PML (Maintenance of Records) Rules, 2005, etc.

• • The reporting is to be made prior to the inward remittance of foreign capital. In cases which do not involve foreign capital inward remittances, the reporting is to be made prior to execution of the relevant transactions, including issuance/transfer of capital instruments, as the case may be.

2. In case of applications seeking government approval pursuant to Press Note 2 for investments into India from LBC investor(s): (a) investing individually or cumulatively, and holding up to 49% of the capital or voting rights of an Indian investee entity engaged in the sectors/activities specified under Schedule II of the Updated SOP (which prescribes such as Capital Goods Manufacturing, Electronic Capital Goods and Electronic Component Manufacturing, among others); and (b) where the majority shareholding and control of the investee entity is with resident Indian citizen(s) and/or resident Indian entity(ies) owned and controlled by resident Indian citizen(s), at all times, the decision shall be conveyed by the Administrative Ministry/Department to the applicant within a period of 60 days from the date of filing of the application.

Conclusion:

The Updated SOP therefore introduces an additional compliance layer for LBC-linked investments which may not otherwise require prior Government approval, by requiring upfront reporting and detailed ownership disclosures. This is expected to strengthen regulatory scrutiny of indirect LBC ownership while providing greater procedural clarity for applicants and Indian investee entities.