Union Cabinet Approves Changes In The PN3 Guidelines Of The FDI Policy

The Union Cabinet, by press release dated 10.03.2026¹ (“Press Release”), has notified changes to the foreign direct investment (“FDI”) policy. The changes focus on change in guidelines introduced under press note 3 dated 17.04.2020 (“PN3”) by the Department for Promotion of Industry and Internal Trade (“DPIIT”) on investments from countries sharing land border with India (“LBC”).

The Press Release has proposed the following changes in the PN3 framework:

1. Incorporation of the definition and criteria for determination of ‘Beneficial Owner’: The inclusion of a definition for Beneficial Owner (“BO”) along with a criterion for determining BO. The test for BO shall be applied at the level of investor entity. Investors from LBCs having non-controlling BO of up to 10% shall be permitted under the automatic route as per the applicable sectoral caps, entry routes and attendant conditions. Such investments shall be subject to the reporting of relevant information/ details by the investee entity to DPIIT.
2. Expedited clearance of investments in specific sectors: Proposals for investments by investors from LBCs in specified sectors/ activities of manufacturing in capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer, shall be processed and decided within 60 days. The Committee of Secretaries may also revise the list of specified sectors. In aforesaid cases, the majority shareholding and control of the investee entity will be with resident Indian citizen(s) and/or resident Indian entity(ies) owned and controlled by resident Indian citizen(s), at all times.

Footnote

1 Press Release: Press Information Bureau.