Jan 11, 2024

Key changes in revised SOP for processing FDI Proposals


The Department for Promotion of Industry & Internal Trade (“DPIIT”) has, by way of a circular dated August 17, 2023, issued revised norms for standard operating procedure (“New SOP”)[i] for processing foreign direct investment (“FDI”) proposals. Consequently, the erstwhile standard operating procedure issued by DPIIT by its circular dated November 9, 2020 (“SOP 2020”)[ii] now stands replaced. These standard operating procedures cover inter alia the process and procedure for filing FDI applications which require government approvals under the Consolidated FDI Policy 2020 and Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and timelines and mechanisms established to monitor the processing of such proposals. While the New SOP does not change the overall procedures to process the FDI applications as compared to SOP 2020, it does change some of the administrative processes. The key changes are described below.

Key Changes

1) Setting up of the National Single Window System (“NSWS”): SOP 2020 provided for online applications to be filed on the Foreign Investment Facilitation Portal (“FIFP”). However, with effect from August 5, 2022, the filing of these application must be carried out through the NSWS online portal.[iii]

2) Digitising the process: The government has attempted to make the application process paperless to digitise filing of FDI applications by completely discontinuing the option of filing them physically. The administrative ministry/department (“Competent Authority”) may only call for a physical copy of the original documents in the event the authenticity of the scanned document is in question. The New SOP provides that to the extent possible, all queries shall be raised to the applicant by the Competent Authority in the initial communication itself.

The New SOP also provides that any documents that are executed outside India need to be authenticated as per the Foreign Exchange (Authentication of Documents) Rules, 2000.[iv]

A format for a corrigendum to the approval letter has also been introduced, which can be issued by the Competent Authority, on the applicant’s request to rectify any typographical or grammatical errors in the approval letter furnished by the Competent Authority.

Further, the user guide on foreign investments available on the NSWS provides that applications for certain approvals would need the form to be digitally signed by a digital signature certificate (“DSC”), which will be asked at the time of submitting the form.[v]

3) Onus on the investor entity to submit the FDI proposal: While SOP 2020 did not explicitly specify whether the application had to be filed by the investor or investee, the New SOP specifically requires the investor to submit an affidavit with the FDI proposal. The NSWS portal also provides the option to login only to the investor, thus indicating that the application can be submitted only by the investor.

4) Increased scrutiny: The New SOP also mandates an additional undertaking to be provided by the investor and investee or their respective promoter(s)/beneficial owner(s)/shareholder(s)/director(s)/ key managerial personnel that they are not the subject matter of any negative or caution or debarred or sanction list issued by the national government, international organizations or any statutory, regulatory, investigative or enforcement authority.

With respect to seeking approvals under Press Note 3 of 2020 (“PN3”)[vi], apart from the details of significant beneficial owner as are required under the Companies Act, 2013, and the rules thereunder, the New SOP specifically requires the applicant to provide entity-wise ownership and management details of all the upstream entities (till the ultimate beneficial owner) of the applicant; who are either from a country sharing land border with India or having beneficial ownership vested in a country sharing land border with India, along with their respective degree/percentage of ownership/shareholding/stake and control in the relevant entity(ies), clearly indicating the place of incorporation/existing citizenship/residency of all such entities/individuals.

For proposals not falling under the purview of PN3, a signed declaration is required to be furnished on the letter head of the applicant stating that none of the investors/shareholders of the Indian Investee company and the foreign investor(s) including their respective beneficial owners (having any percentage of shareholding) are situated in or are citizen(s) of country(ies) sharing land border with India.

5) No approval requirement for further equity inflow in certain instances: The format for the approval letter in the New SOP provides that no prior approval of the Competent Authority is required for an increase in foreign investment so long as there is no change in the percentage of foreign/NRI equity holding already approved and the total foreign equity is up to INR 5000 crores (approximately USD 600 million). In such a case, the investee shall only be required to notify such increase to the Competent Authority.

6) Monitoring and review: New SOP provides that each ministry/department shall have a dedicated FDI cell with a nodal officer not below the rank of Joint Secretary.


[i] https://fifp.gov.in/Forms/SOP.pdf

[ii] https://dpiit.gov.in/sites/default/files/SOP-dated-09112020-for-processing-of-FDI-Proposals-10Nov2020.pdf

[iii] https://fifp.gov.in/

[iv] https://upload.indiacode.nic.in/showfile?actid=AC_CEN_2_45_00004_199942_1517807323986&type=rule&filename=FEM%20(%20Authentication%20of%20Documents)%20Rules,%202000.pdf

[v] https://www.nsws.gov.in/faqs

[vi] https://dpiit.gov.in/sites/default/files/pn3_2020.pdf





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