Press Note 2 FDI Paperwork May Get Simpler: What Is in Force and What Is Only Being Considered

On 27 October 2026, several outlets reported, citing unnamed sources, that the government is considering simplifying the paperwork under Press Note 2 (2026) for foreign investment into Indian companies that have small ownership from countries sharing a land border with India (land-border countries, or LBCs). Nothing has been approved or notified yet, and there is no timeline.

This matters if you are raising from a global fund that has a minority LBC investor somewhere in its structure. Below we separate what is already in force from what is only being considered, because the two are easy to mix up in headlines.

What is only being considered

Reports from ANI, PTI (carried by The Economic Times and Rediff), The New Indian Express, Business Standard and PSU Watch all point the same way:

• The government is looking at easing the application process and paperwork under Press Note 2, for investments where LBC ownership is small. Outlets describe the threshold as "less than 10 per cent" or "up to 10 per cent".
• A Commerce Ministry source told The New Indian Express there could be further easing, "especially in the documentation process".
• An official told Business Standard, on condition of anonymity, "We may reduce paperwork under Press Note 2" for companies that do not need government approval to invest.
• ANI reported that the aim is to simplify application forms and reduce procedural requirements for companies with minority Chinese shareholding.

What has not been announced: which forms or documents would change, which review stages would go, who would be covered beyond what is already allowed, and when any change would happen. The reports rely on unnamed sources, and we did not find a notification or a named government statement. Treat this as a signal of direction, not as a rule you can plan around.

What is already in force

The background. Press Note 3 of 2020, issued in April 2020, required government approval for investments from LBC entities. Under it, an entity from an LBC, or an investment whose beneficial owner is in or a citizen of an LBC, could invest only through the government route. Reports say even a single share held by an LBC shareholder triggered prior approval, in any sector. The Press Information Bureau release notes that this was seen as hurting flows from investors including global funds such as PE and VC funds.

The change. The Union Cabinet approved amendments in March 2026, and the amended rules are known as Press Note 2 (2026 series). According to the Cabinet release and the reports:

• Investors with non-controlling LBC beneficial ownership of up to 10 per cent can invest under the automatic route, as per the applicable sectoral caps, entry routes and other conditions.
• The beneficial ownership test is applied at the level of the investor entity. The amendment adds a definition and criteria for beneficial ownership, based on the one used under the Prevention of Money Laundering Rules, 2005.
• Such investments are subject to reporting of relevant details to DPIIT by the investee entity, meaning the Indian company receiving the money.
• Proposals for LBC investment in specified manufacturing activities, namely capital goods, electronic capital goods, electronic components, and polysilicon and ingot-wafer, are to be processed and decided within 60 days.

What still needs approval. Business Standard reports that government approval is still required if an LBC company owns a controlling stake in the investing firm. Outlook Business adds that the relaxed rules do not cover entities registered in China, Hong Kong or other land-border countries themselves. Sectoral caps and entry routes continue to apply to every investment.

On dates, the reports differ. Outlook Business says DPIIT notified Press Note 2 in March and that the changes took effect on 1 May 2026, when the Finance Ministry notified amendments under FEMA. Business Standard says DPIIT notified the norms in May. The safe reading is: approved and issued in the March 2026 round, with the rules operating from May. For the exact wording and effective dates, go to the notified text.

Early numbers. Business Standard reports that the government said in August that India had received FDI worth ₹4,896 crore in 29 projects from such overseas firms since the notification.

Why a paperwork change would still matter

The reported idea is to reduce the effort for investments that already do not need prior approval. It would not remove the 10 per cent limit, the sector rules or the reporting duty. The New Indian Express frames the aim as less complicated paperwork while keeping scrutiny of Chinese-linked capital. One report says the relaxation is expected to help sectors such as startups, where access to funding remains important.

What this means for you

• Do not plan around the proposal. It is unconfirmed, with no form list and no date. Plan on the rules as they are today.
• If you are raising from a global fund, ask the fund whether it has any LBC beneficial ownership and whether it expects to rely on the automatic route. The test is applied at the investor-entity level, and whether a particular fund structure falls within the 10 per cent, non-controlling condition depends on its facts.
• Ask who handles the reporting. The reporting to DPIIT is described as the investee entity's task. Confirm before closing who prepares and files it, and keep your cap table and investor documents ready.
• Check the sector. Sectoral caps and entry routes still apply. If you are in manufacturing of capital goods, electronic components or the other listed activities and need approval, the 60-day decision period is the timeline reported in the Cabinet release.
• Watch for the official notification. If the government acts, the change should appear as an official notification, and that text, not a news summary, is what applies to your deal.
• Get a professional's view for your case. This article explains the reports and is not legal advice. For a specific round, ask your lawyer or company secretary to check the notified text against your investor's structure.

Sources: ANI, PTI (via The Economic Times), The New Indian Express and Business Standard on the proposal under consideration; the Press Information Bureau Cabinet release and Outlook Business on the framework already in force.

Cover photo: Laurentiu Morariu on Unsplash