India’s New FDI Rules for Foreign Companies, FOCE in 2025

India is set to tighten up its foreign direct investment (FDI) policy in an effort to monitor and regulate businesses with foreign capital more closely, two senior government officials announced. The action will have a heavy impact on industries such as e-commerce and pharmaceuticals according to Reuters.

As per the sources, who spoke on condition of anonymity since the talks are not public, the government is in the advanced stages of overhauling FDI regulations. The proposed changes will create a new category termed “foreign-owned and controlled entities” (FOCE). This category will encompass Indian businesses that are directly or indirectly controlled by foreign investors.

How Will FOCE Rules Impact Indirect Foreign Ownership?

The new framework is an attempt to redefine the way foreign ownership is dealt with, especially where share transfers or restructuring of corporations are involved. Even domestic transactions like internal restructuring, may be subject to FDI compliance under the revised rules of FOCE.

“What cannot be done directly should not be allowed indirectly either,” one official stated, referring to the intention of the government to fill loopholes in existing regulations.

The new rule will also mandate indirect shareholding transfers to comply with current sectoral foreign investment caps and to be done at fair market value. This makes compliance and transparency in foreign investments more possible.

This policy change is just one aspect of India’s overall effort to tighten investment screening. Since 2020, India has imposed prior approval for investments from neighboring nations including China. The FOCE categorization is meant to stop such investors from evading restrictions via offshore entities or layered domestic structures. Both the RBI, which will release the final guidelines and the Finance Ministry remain silent.

The amendments are a major move for India as part of its ongoing endeavor to safeguard strategic industries and ensure the integrity of its FDI regime.