SOP for FDI approval rationalised for Border- Country Investment

– Saloni Khant, Senior Executive | corplaw@vinodkothari.com

– Prescribes 60 days approval timeline for critical sectors, format for reporting LBC investments and more

After liberalising the receipt of FDI from countries sharing land-border with India (LBC Amendment) [read our article here], the DPIIT issued a revised SOP for applications seeking government approval to receive FDI w.e.f. May 4, 2026. The revised SOP brings significant changes with new reporting guidelines for LBC investments with non controlling stake under automatic route, a 60 days timeline for government approval for critical sectors etc. as discussed below.

Brief Highlights of the amendments

• Reporting guidelines for LBC investments with non-controlling stake under automatic route [Para I of Annexure VII]
  • The LBC Amendment brought about a significant amendment that where a citizen or entity of LBC has non-controlling stake in an Indian investee entity, such FDI can be routed through the automatic route. Previously, such FDI was under the government approval route.
  • The Amendment provided that receipt of such FDI must be reported. The SOP provides the format and manner for such reporting.
  • The onus of reporting is on the Indian Investee entity or resident Indian transferor/transferee.
  • Schedule I of the SOP provides the format for reporting requiring extensive documents about the investor, Indian investee entity, other details including underlying agreements, details of downstream investments and a declaration by the reporting entity.
  • Manner of reporting
    • The form must be filed online through the FIF / NSWS^[1] portal and no physical copies shall be required.
    • The reporting is to be done prior to the inward remittance of foreign capital.
    • In case of other transactions, this shall be done prior to execution of the relevant transactions, including issuance/transfer of capital instruments. 

• Fixed 60 days timeline for government approval for FDI from LBC in critical sectors [Para II of Annexure VII]
  • In line with the proposals made in the CG press releasedated March 10, 2026, the SOP reduces the timelines for grant of approval from 12 weeks to 60 days for receipt of FDI from LBC with the following conditions:
    • The LBC investor investing individually or cumulatively, whether acting together or otherwise, holds up to 49% of the capital or voting rights of the Indian Investee entity.
    • The Indian Investee entity is engaged in manufacturing in specified sectors/activities [as detailed in the image]
    • The majority shareholding and control of the Investee entity is with a resident Indian citizen/ an entity owned and controlled by resident Indian citizen(s) at all times. 

• Specific approval of the Ministry of External Affairs (MEA) for FDI from LBC [Para II.2]
  • Investments from LBC now specifically require comments/ approval from the MEA. Previously, all the proposals were sent to the MEA for information and it could send its comments to the concerned Ministry.

• Stricter adherence to timeline for Ministry of Home Affairs [Para II.4]
  • Where the authorities do not provide comments within prescribed timelines, it is presumed that they have no comments. Previously, where MHA could not meet the timelines, it was required to intimate the relevant department of the revised timeframe. This liberty for MHA is now omitted providing for faster approvals.

• Committee for expeditious approvals dissolved [Para I.4]
  • An inter-ministerial committee constituted to decide delayed FDI proposals and proposals escalated by relevant Ministry/Department for quick disposal has now been discontinued. Further, to simplify and expedite the approval process, the DPIIT has retained its previous instruction to the authorities to not replicate these kinds of structures.       

• Closure of application gets more structural clarity [Para II.9]
  • Where the FDI applications are incomplete or the applicant has not responded to the relevant authority’s queries, the application may be closed with liberty to reapply.
  • Previously, in case the applicant is sent ‘repeated reminders’, the application may be closed.
  • The amended provisions require the Competent Authority to scrutinize the application within 1 week and issue clarifications, if any. The applicant may respond within 1 week failing which 2 reminders at a gap of 7 days shall be sent.

• Other Changes
  • An entirely paperless approval system [Para I.3]
    • Previously, the concerned Ministry/ Department could call for physical copies of the original documents in case authenticity of any scanned documents is in doubt. This power has been removed.
  • Alignment of documents required for FDI proposal with LBC Amendment [Annexure-I]
    • The requirements of details related to the beneficial owner (BO) have been updated to enable identification of the BO pursuant to the amendment.

^[1] Foreign Investment Facilitation / National Single Window System

Refer to our other resources:

1. Open but Guarded Gates: Relaxations for Border-Country Investments
2. RBI rationalises Guarantee regulations
3. Resource Centre on FDI