The Press Note 3 (2020) is a provision that amended India's Foreign Direct Investment (FDI) policy, issued by the Department for Promotion of Industry and Internal Trade (DPIIT) on April 17, 2020. It was created during the early weeks of the COVID-19 pandemic to solve the problem of "opportunistic takeovers/acquisitions" of financially distressed Indian companies by foreign entities. The provision was a national security safeguard to prevent predatory investments at a time of economic vulnerability.
The core mechanism of the provision is the mandatory shift of the investment route from 'automatic' to 'government approval' for certain investors. Specifically, Paragraph 3.1.1 of the Consolidated FDI Policy was amended to require prior government approval for all FDI originating from, or where the beneficial owner is situated in or is a citizen of, any country that shares a land border with India. The seven countries covered are Afghanistan, Bangladesh, Bhutan, China, Myanmar, Nepal, and Pakistan. This requirement applies to both direct investments and any transfer of ownership that results in the beneficial ownership falling under this purview. The provision was subsequently incorporated into Rule 6 of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (FEMA 20(R)).
The original Press Note 3 (2020) has been recently changed by Press Note 2 (2026 Series), which introduced a more structured, threshold-based approach. The amendment, which came into effect with the notification of the Foreign Exchange Management (Non-debt Instruments) Amendment Rules, 2026, in May 2026, clarifies the beneficial ownership test. Investments where the beneficial ownership from a land-bordering country does not exceed 10 percent and does not confer control are now permitted under the automatic route. However, such automatic route investments are subject to a mandatory reporting requirement to the DPIIT. Investments exceeding the 10 percent threshold or resulting in control still require prior government approval. The new framework aligns the definition of 'beneficial owner' with the criteria stipulated under Rule 9(3) of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 (PMLA Rules).