With the aim of enhancing “ease of doing business” and “promoting the principle of Maximum Governance and Minimum Government”, the Government of India abolished the Foreign Investment Promotion Board (“FIPB“) on May 24, 2017. In its place, the relevant administrative ministry/department in consultation with the Department for Promotion of Industry and Internal Trade (“DPIIT“) are now directly responsible for processing applications for foreign direct investment (“FDI“) in India in sectors which require prior approval of the Government. However, (DPIIT) earlier known as Department of Industrial Policy & Promotion (DIIP).

The Government of India, vide its Notice No. 1/8/2016-FDI Policy Government of India, Ministry of Commerce & Industry, Department of Industrial Policy & Promotion on 9th November, 2020 revamp the existing Standard Operating Procedures (SOPs) for processing foreign direct investment (FDI) proposals to fast track approvals.

The Salient features of the updated SOPs for processing FDI proposals, inter alia includes:

     A.      Online Filing of Application:

         B.       Competent Authorities for Approval/Rejection of Foreign Investment:

After the abolition of the FIPB, the DPIIT issued a standard operating procedure (“SOP“) for processing FDI proposals with guidelines, including detailed timelines, to ensure uniformity of approach across sectors. The SOP identified administrative ministries/departments (the “Competent Authority“) for respective sectors in which FDI requires the prior approval of the Government.

Investments from an entity of a country that shares a land border with India, or where the beneficial owner of an investment into India situated in or is a citizen of any such country, would require clearance from the Ministry of Home Affairs.

 C.   Procedure for Processing of Applications Seeking Approval for Foreign Investment for a simpler and expeditious disposal:

1.     Upon receiving the proposal, DPIIT shall circulate the same within 2 days to RBI and Ministry of External Affairs for their comments. Additionally, if security clearance is required the proposal would be referred to Ministry of Home Affairs (MHA).

2.     If specific issues of proposals requires clarification in FDI Policy, the same shall be referred to DPIIT for clarification within 2 weeks of referral.

3.     Consultation with any other Ministry/ Department will require full justification and approval of the concerned Secretary.

4.     Comments of the concerned ministries/departments and MHA for security clearance shall be uploaded on the portal within 4 weeks and 6 weeks from the  online receipt of the proposal, respectively.

5.     Within 1 week of scrutinizing the application with additional comments, the Competent Authority shall raise queries or ask for additional documents from the applicant. Time taken by applicant to address the same to be excluded from time limit for disposal of application.

6.     Once the proposal is complete, the approval/rejection shall be communicated online to the applicant and the consulted Ministries/ Departments by the Competent Authority within 4 weeks.

7.     In case of proposals involving total foreign equity flow of more than Rs. 5000 crores, the Competent Authority will place the same for consideration before the Cabinet Committee on Economic Affairs within the timelines specified, with the decision to be communicated 1 week from such consideration concluding.

8.     Proposals which are sought to be rejected, or proposals stipulating additional conditions, shall require concurrence of DPIIT by the Competent Authority within 10 – 12 weeks (MHA should be consulted) from receipt of the proposal.

9.     All Mergers & Acquisitions involving FDI requires approval of the NCLT/Competent authority as a “necessary pre-condition”. In case if NCLT/Competent authority approval is not available the applicant may be advised to resubmit the application along with requisite approval(s).

10. Secretary, DPIIT is the competent authority that issued the approval letter in the prescribed format for rejection of the proposal/stipulation of additional condition.

11. DPIIT and each of the Competent Authorities shall maintain a database on the proposals received along with details such as date of receipt, investor and investee company details, volume of foreign investment involved, and date of grant of approval/rejection letter.

12. If an applicant proposes to surrender an approval letter granted to the investee entity/investor, then concerned administrative Ministry/Department may accept the withdrawal of the approval letter and an acknowledgement in this regard has to be sent to the applicant clearly indicating the date from which the approval letter stands withdrawn.

    D.  Monitoring & Reviewing:


DPIIT has issued a new set of guidelines in place of existing SOP issued in 2017, to expedite the process for clearances, including security, for processing FDI proposals on the fast track approval route in terms of the guidelines and requirements under the FDI Policy, SOP and FIFP. 

This Article has been Compiled by Deepika Sharma  (Senior Associate) You can direct your queries or comments to the author at deepika@factumlegal.com


The contents of this article should not be construed as legal opinion. This article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. We expressly disclaim any financial or other responsibility arising due to any action taken by any person on the basis of this article.



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