Foreign Direct Investment (FDI) plays a crucial role in boosting the Indian economy by allowing overseas investors to invest in India. While many sectors are open under the automatic route, strategic sectors or specific investor categories require prior government approval under the ‘Approval Route’.
This article focuses on the approval route. It outlines the procedure for handling FDI proposals under the approval route based on the Standard Operating Procedure (SOP) issued by the Department for Promotion of Industry & Internal Trade (DPIIT) on August 17, 2023.
I. Applicability of the Approval Route
Investments in the following cases, among others, generally require government approval:
| • Sectors such as defence, telecom, civil aviation, satellites, mining, private security, and print media |
| • Foreign investments from entities or individuals based in countries sharing land borders with India |
II. Filing Procedure – As per SOP dated August 17, 2023
The step-by-step filing process is as follows:
| Step | Action |
| Step 1 | Applications must be submitted online via the National Single Window System (NSWS), integrated with the Foreign Investment Facilitation Portal (FIFP). |
| Step 2 | Upload all required documents digitally – The list of documents required to be uploaded is provided as Annexure 1 to the SOP. This includes shareholding pattern, KYC documents, investment details, etc. |
| Step 3 | Security Clearance Form must be submitted for sensitive sectors[1] or investors from countries sharing a land border with India. The format of the Security Clearance Form is provided as Annexure II of the SOP. |
| Step 4 | DPIIT forwards the application to the relevant administrative ministry/department within 2 days. |
| Step 5 | The application is also sent to the Reserve Bank of India (RBI), the Ministry of External Affairs (MEA), and the Ministry of Home Affairs (MHA) (if security clearance is required) for consultation/information as applicable. |
| Step 6 | Ministries/departments raise queries or seek additional information/documents via the FIF portal. |
| Step 7 | The final decision is made by the concerned ministry or escalated to the Cabinet Committee on Economic Affairs (CCEA) for high-value proposals. |
III. Timeline Summary (as per Annexure V of SOP)
| Action Point | Time Period | Cumulative Time Period |
| DPIIT forwards proposal to relevant ministries | 2 days | – |
| Initial scrutiny and additional document requests | 12 days | 2 weeks |
| Submission of clarification by DPIIT on specific issues of FDI Policy | 2 Weeks | 4 weeks |
| Submission of comments by MHA, MEA, and any other consulted Ministry/Department / RBI/ Regulator / Stakeholder | 6 Weeks | 8 Weeks |
| Approval of proposals | 4 Weeks | 12 weeks |
Note:
An additional period of two (02) weeks is provided to the DPIIT for examining proposals that are either proposed to be rejected or where the Competent Authority intends to impose additional conditions.
Further, the stipulated time limits do not account for the time taken by applicants to address deficiencies or furnish any additional information sought by the Competent Authority.
IV. Post-Approval Compliance/Requirement
Where the investment is proposed in an entity that is yet to be incorporated, the applicant is required to submit the Certificate of Incorporation along with Charter Documents (i.e., the Memorandum and Articles of Association) of the investee company to the Competent Authority within sixty (60) days of receiving the approval letter.
Additionally, once the first audit cycle of the newly incorporated investee is completed, the applicant must also submit the Audited Financial Statements to the Competent Authority.
This effectively means that, in cases where the FDI proposal is for an entity yet to be incorporated, the incorporation process must be completed within sixty (60) days of receiving the government approval. Timely incorporation is essential to remain compliant with the post-approval requirements outlined by the Competent Authority.
Other compliance requirements post FDI approval are as under:
| Compliance Requirement | Timeline |
| Receipt of funds via an authorised dealer bank | – |
| Share allotment | Within 60 days of fund receipt |
| Filing of FC-GPR (FIRMS portal) | Within 30 days of share allotment |
| Filing of PAS-3 with MCA | As per the Companies Act |
| FLA Return | By 15th July annually |
V. Closure, Withdrawal, and Amendment
- Proposals can be closed if not properly submitted, after due reminders.
- Applicants can withdraw their applications with a written request.
- Amendments to approvals do not require a fresh application.
- A corrigendum for typographical errors can be issued.
VI. Final Note
The SOP issued by DPIIT ensures that FDI proposals requiring approval are processed transparently, efficiently, and in coordination with sectoral regulators and ministries. Timely response to queries and adherence to compliance timelines are critical for successful navigation of the approval process.
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Disclaimer: This article is for general information purposes only and does not constitute any advice. Please get in touch with your consultant before taking any step(s). We shall not be responsible for any loss incurred due to the step(s) taken basis the information shared in this article.