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India revises FDI policy to prevent opportunistic take of Indian companies amidst COVID-19

18 April 2020   

With Eye On China, India Revises FDI Policy To Shield Firms Amid Pandemic

The Government of India has revised the Foreign Direct Investment policy for curbing opportunistic takeovers/acquisitions of Indian companies due to coronavirus.

A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited.

Companies in any country that shares a border with India will have to approach the government for investing in India and not go via the automatic route, the Commerce and Industry Ministry said in a press note spelling out its new foreign direct investment or FDI policy for neighbouring states.

FDI in India is allowed under two modes - either through the automatic route, for which companies don't need government approval, or through the government route, for which companies need a go-ahead from the centre.

The revised FDI rule seeks to curb "opportunistic takeovers or acquisitions of Indian companies due to the COVID-19 pandemic".

The government decided to revise the FDI rule to ensure no neighbouring country, especially China, takes undue advantage amid the COVID-19 pandemic.

"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".

The earlier FDI policy was limited to allowing only Bangladesh and Pakistan via the government route in all sectors. The revised rule has now brought companies from China under the government route filter.

The revised rule is not applicable to the recent 1.01 per cent stake sale by mortgage lender HDFC to People's Bank of China as the deal was less than the strategic 10 per cent, the sources said. The revised FDI policy is applicable in large shareholdings of 10 per cent and above.

Also Read:

FDI Policy

Foreign Direct Investments

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