Government amends Foreign Direct Investment (FDI) policy for curbing opportunistic acquisitions of Indian companies - (17 Apr 2020)

Commercial

The Government of India has reviewed the extant FDI policy for curbing opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic. The Central Government amends para 3.1.1 of extant FDI policy as contained in Consolidated FDI Policy, 2017. The step is in wake of news relating to China's central bank raising stake in Housing Development Finance Corporation (HDFC).

According to Present Position given in Para 3.1.1, a non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, a citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.

As per Revised Position [ para 3.1.1(a)], an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route. Further, in the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview of the para 3.1.1(a), such subsequent change in beneficial ownership will also require Government approval.

Tags : INVESTMENT FDI POLICY AMENDMENT