Insights · FEMA
Land-border FDI eased: Press Note 2 and the revised FEMA NDI Rules
Press Note 2 of 2026 and the corresponding amendment to the FEMA Non-Debt Instruments Rules ease the blanket approval requirement for FDI from land-border countries, within defined limits.
Since Press Note 3 of 2020, foreign direct investment from a country sharing a land border with India — or where the beneficial owner is situated in, or is a citizen of, such a country — has required prior Government approval, regardless of sector or amount. Press Note 2 of 2026, given legal effect through an amendment to the Foreign Exchange Management (Non-Debt Instruments) Rules notified in early May 2026, narrows that requirement.
What has changed
As notified, investments where the relevant land-border beneficial ownership is non-controlling and within a defined low threshold — reported at up to 10%, determined with reference to the beneficial-ownership concepts under the prevention-of-money-laundering framework — may proceed under the automatic route, rather than requiring prior approval.
Why it matters
The 2020 restriction had, in practice, swept in funds and entities with only small or indirect land-border exposure, delaying otherwise routine investments. The carve-out is aimed at those cases. Controlling investments, and investment in sensitive sectors, continue to require approval.
For inbound investors
Structuring and beneficial-ownership analysis remain essential — the position turns on who the beneficial owners are, not only on the immediate investor. The firm advises on the route applicable to a proposed investment and on the FC-GPR and related reporting that follows.
References
This article is for general information and is not professional advice. Thresholds and rules change; your position should be confirmed for your facts before it is acted upon.