DPIIT Issues Revised SOP for Processing FDI Proposals

On May 4, 2026, the Department for Promotion of Industry and Internal Trade (“DPIIT”), Ministry of Commerce and Industry, issued a revised Standard Operating Procedure (SOP) for Processing Foreign Direct Investment (FDI) Proposals to streamline and digitise the approval framework for foreign investment proposals requiring government approval under India’s FDI regime.

The SOP replaces the earlier 2017 framework governing processing of FDI proposals and introduces expanded compliance, disclosure and monitoring requirements. The revised framework also extends the overall disposal timeline for FDI proposals from 10 weeks to 12 weeks.

Online Filing and Processing Framework

The SOP provides that all proposals requiring government approval under the Consolidated FDI Policy dated October 15, 2020 and the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 must be filed online through the Foreign Investment Facilitation (FIF)/NSWS portal. The filing process has been made “completely paperless”, and applicants are required to digitally upload disclosures relating to ownership structure, beneficial ownership, downstream investments, valuation, sanctions and debarment.

The SOP further clarifies that Competent Authorities shall not replicate inter-ministerial approval mechanisms within Ministries or Departments and that the approval regime should be “simpler to execute and more expeditious.” Once a proposal is filed, DPIIT will assign it to the concerned Administrative Ministry or Department (“Competent Authority”) and circulate it to the Reserve Bank of India (“RBI”) for comments, as well as to the Ministry of Home Affairs (“MHA”) and Ministry of External Affairs (“MEA”), wherever applicable.

MEA clearance is specifically required for investments from LBCs under Paragraph 3.1.1 of the FDI Policy, which governs investments from countries sharing land borders with India, including Government approval requirements, beneficial ownership tests and related reporting obligations for such investments.

After filing of the proposal, DPIIT will assign it to the Competent Authorities under Chapter 4 of the Consolidated FDI Policy which includes defence, telecom, broadcasting, civil aviation and investments involving countries sharing land borders with India. The SOP further clarifies that such Competent Authorities will also process applications seeking post-facto approval under Paragraph 4.1.2 of the FDI Policy in cases where the relevant sector or activity is presently under the automatic route but had required Government approval at the time the foreign investment was originally made.

Processing Timelines and Security Clearance

Security clearance from MHA is mandatory for investments in broadcasting, telecommunications, space, private security agencies, defence, civil aviation, mining and mineral separation involving titanium-bearing minerals and ores, as well as applications covered under Press Note 2 of 2026 and the Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2026 dated May 1, 2026.

The SOP prescribes a structured processing timeline, including dissemination of proposals within 2 days, scrutiny and deficiency queries within 12 days, DPIIT clarification on FDI policy issues within 2 weeks, stakeholder comments within 6 weeks, and final disposal within 4 weeks, resulting in an overall cumulative timeline of 12 weeks. Additional time taken by applicants in removing deficiencies is excluded, and where comments from consulted Ministries or regulators are not received within the prescribed timelines, it will be presumed that they have no comments to offer.

The SOP prescribes standard conditions applicable to approved FDI proposals, including compliance with the FDI Policy, FEM (NDI) Rules, sectoral regulations, RBI pricing and reporting guidelines, and downstream investment requirements under Rule 23 of the FEM (NDI) Rules. The framework also clarifies that Government approval does not automatically confer tax benefits under the Income-tax Act, 1961 or applicable DTAAs, nor provide immunity from tax investigations or anti-avoidance scrutiny.

The SOP further clarifies that no prior approval of the Competent Authority is required for increase in foreign equity up to INR 5000 crores, provided there is no change in the approved percentage of foreign/NRI shareholding, subject to post-facto notification to the Competent Authority within 30 days of receipt of funds and allotment of shares.

In cases involving rejection of proposals or imposition of additional conditions beyond the FDI Policy or sectoral laws, prior concurrence of DPIIT is mandatory. The SOP also separately provides mechanisms for closure of incomplete applications, withdrawal of applications, surrender of approval letters, rectification through corrigenda, and compounding of FEMA contraventions. The SOP additionally clarifies that contraventions of FDI regulations are subject to penal provisions under FEMA and may be compounded in accordance with Section 15 of the Foreign Exchange Management Act, 1999, which governs power to compound contravention, the Foreign Exchange (Compounding Proceedings) Rules, 2000 and the RBI Master Directions on Compounding of Contraventions under FEMA.

LBC Investments and Beneficial Ownership Framework

The SOP incorporates revised guidelines introduced through Press Note 2 of 2026 concerning investments from LBCs. Paragraph 3.1.1(d) of the amended FDI Policy requires reporting of investments involving direct or indirect ownership by LBC-linked entities even where prior Government approval is not otherwise required.

The SOP further prescribes reporting obligations based on beneficial ownership thresholds under Section 2(1)(fa) of the Prevention of Money Laundering Act, 2002 and Rule 9(3) of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005. Such reporting must be completed prior to inward remittance or execution of the transaction.

It additionally introduces an expedited 60-day approval mechanism for specified LBC investments in sectors such as electronics manufacturing, advanced battery components, semiconductors, rare earth processing, and heavy electrical equipment, subject to conditions including aggregate LBC shareholding not exceeding 49% of the capital or voting rights of the Indian investee entity and majority ownership and control remaining with resident Indian citizens and/or Indian entities owned and controlled by resident Indian citizens.