In the wake of the economic and financial crisis caused by the COVID-19 pandemic, Govt of India has revised its foreign direct investment (FDI) policy through Press Note 3 of 2020 (Press Note) imposing stricter norms on foreign investments in Indian companies from an investor based out of bordering countries. The primary objective of the revised FDI policy is to curb any opportunistic takeovers or acquisitions of Indian companies during the COVID-19 pandemic.
Under the amended FDI policy, a mandatory prior government approval will now be required for any foreign investment in or acquisition/transfer of an Indian company (directly or indirectly), where the acquirer or beneficial owner of such investment is based out of a country which shares land borders with India. It may be helpful to note that the newly introduced restrictions do not prohibit foreign investment from bordering countries into India but only seek to regulate future foreign investments into India or transfer of existing Indian investments to beneficial owners located in bordering countries. Among the border countries, China is the only land neighbouring country of India who makes substantial foreign investments into India.
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