Government tweaks FDI policy to curb opportunistic takeovers of Indian companies; Congress welcomes the move

Union Government today reviewed the existing Foreign Direct Investment (FDI) policy in light of the current Coronavirus, COVID-19, pandemic. The new provisions of the policy aim towards curbing opportunistic takeovers and acquisitions of Indian companies.

The department for Promotion of Industry and Internal Trade in its press note 3 (2020) issued on Saturday said foreign investments from countries with which India shares land border shall be under the approval route.

The new norms state that an entity of a country sharing a land border with India can invest only under the Government route. The policy is also applicable for entities whose owner is a citizen or is situated in any such border sharing country.

For Pakistan based owners, citizens or entities investment could be made only under the Government route in sectors other than defence, space, atomic energy and other notified sectors prohibited for foreign investment.

The new policy clarifies that in case of any change or transfer in ownership of an Indian entity arising because of FDIs from such countries would also require government approval.

The policy was reviewed at a time when the market regulator SEBI has asked custodian banks to disclose details of 'ultimate beneficial owners' of foreign portfolio investors (FPIs) based in China and Hong Kong.

Congress has welcomed the amendment in FDI Policy by the government in view of COVID-19 pandemic. The party said, the decision will plug creeping acquisition of any Indian entity.

Senior Congress leader Rahul Gandhi thanked the Central Government for amending the FDI norms and making government's approval mandatory in some specific cases. The former Congress party President earlier on April 12, 2020, through a tweet expressed concerns on the issue and said, "The massive economic slowdown has weakened many Indian corporates making them attractive targets for takeovers. The Govt must not allow foreign interests to take control of any Indian corporate at this time of national crisis."

His tweet was connected to the Chinese central bank's move to raise its stake to 1% stake in HDFC.

Party Spokesman Randeep Singh Surjewala said that the party is glad that the government has positively responded to former Congress President's suggestion of protecting Indian Corporates from hostile takeovers.