The Finance Ministry on Saturday notified amendments to the Foreign Exchange Management Rules, allowing overseas companies with up to 10 per cent Chinese (or other land-bordering country) shareholding to invest in India under the automatic route.
The move follows a Cabinet decision to ease FDI norms for investments from land-bordering countries (LBCs) and is aimed at boosting manufacturing in electronic components, capital goods and solar cells.
China shares land borders with India along with Pakistan, Bangladesh, Nepal, Myanmar, Afghanistan and Bhutan.
The amendment introduces a clearer definition of beneficial ownership, aligned with the Prevention of Money Laundering Rules, 2005, and widely used by investors. Under the revised framework, the beneficial ownership test will apply at the investor entity level, investments with non-controlling LBC ownership of up to 10 per cent will be allowed under the automatic route, subject to sectoral caps and conditions and investee companies must report relevant details to DPIIT.
key exclusions
In effect, foreign companies with up to 10% Chinese or Hong Kong shareholding can now invest in sectors open under the automatic route.
However, the relaxation does not apply to entities incorporated in China, Hong Kong or other LBCs. Earlier, even minimal shareholding from these jurisdictions triggered mandatory government approval; now, the restriction is linked specifically to beneficial ownership.
The notification also clarified that multilateral banks or funds of which India is a member will not be treated as entities of any specific country, nor will any country be deemed the beneficial owner of such investments.
At the same time, investments involving any direct or indirect LBC ownership — while not requiring prior approval under the revised norms — will remain subject to RBI-prescribed reporting requirements.
Separately, the Cabinet has mandated that proposals involving LBC investments in key manufacturing segments such as capital goods, electronic components, polysilicon and ingot-wafer be processed within 60 days. In all such cases, majority ownership and control must remain with resident Indian citizens or Indian-owned entities.
Published on May 2, 2026