Question 1

All investments from countries sharing land borders with India require prior government approval.

Accepted Answer

The March 2026 amendment relaxed this rule, allowing non-controlling beneficial ownership of up to 10 percent from these countries under the automatic route.

Question 2

The 10 percent automatic route limit applies to all sectors uniformly.

Accepted Answer

Strategic sectors like defense, space, and atomic energy still do not permit automatic route investments from land-bordering countries, regardless of the stake.

Question 3

Consider the following statements regarding the 2026 amendments to the FDI policy under Press Note 3 (2020):
1. Non-controlling beneficial ownership up to 10 percent from land-bordering countries is now permitted under the automatic route.
2. The definition of beneficial ownership for this FDI policy is aligned with the Prevention of Money Laundering Act (PMLA) rules.
3. A 60-day expedited clearance timeline has been mandated for all sectors receiving FDI under the government approval route.
How many of the above statements are correct?

Accepted Answer

(b) Only two — Statement 1 is correct as the new policy allows up to 10 percent non-controlling stake via the automatic route. Statement 2 is correct because the threshold alignment explicitly relies on PMLA rules. Statement 3 is incorrect because the 60-day expedited timeline is specifically mandated only for investments in 'specified critical manufacturing sectors', not all sectors.

Question 4

Match List I (Policy/Term) with List II (Associated Provision):
List I:
A. Press Note 3 (2020)
B. Beneficial Ownership limit
C. Automatic Route
D. Expedited Clearance

List II:
1. 10 percent threshold aligned with PMLA
2. 60-day timeline for critical manufacturing
3. Curbed opportunistic takeovers during COVID-19
4. Does not require prior RBI or Government approval

Select the correct answer using the codes given below:

Accepted Answer

(a) A-3, B-1, C-4, D-2 — A matches 3 as PN3 was introduced to halt hostile takeovers from land-bordering countries during the COVID-19 pandemic. B matches 1 because the 2026 FDI amendment aligns beneficial ownership with the 10 percent PMLA rule. C matches 4 as the automatic route implies no prior government or RBI approval is needed. D matches 2 because the recent amendment introduces a strict 60-day timeline for critical manufacturing.

Question 5

Assertion (A): The 2026 FDI policy modifications allow multi-layered global venture funds with minor Chinese limited partners (LPs) to invest in Indian startups through the automatic route without facing delays.
Reason (R): The modifications established an explicit beneficial ownership threshold of 10 percent based on PMLA rules, below which the government route is not triggered for non-controlling stakes.
Select the correct answer:

Accepted Answer

(a) Both A and R are true and R is the correct explanation of A — Both statements are true. Prior to 2026, vague beneficial ownership definitions meant even a fraction of a percent of Chinese LP capital in a global fund triggered government scrutiny under PN3. By establishing a clear 10 percent threshold (R), global funds with minor, non-controlling LPs from land-bordering countries can now bypass the government route (A). Therefore, the 10 percent PMLA threshold (R) is the direct reason why global funds with minor LPs can now invest automatically (A).

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