Schedule I to the FEM (Non-debt Instruments) Rules, 2019: paragraph 3(a) - automatic route and Government route

Schedule I explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Paragraph 3(a) of Schedule I to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 defines the two entry routes for foreign investment in an Indian entity, the automatic route and the Government route, and adds a third item on when aggregate foreign portfolio investment escapes both Government approval and sectoral conditions. Every "Entry Route" cell in the sectoral Table is read with these definitions. The Rules are made under clauses (aa) and (ab) of sub-section (2) of section 46 of the Foreign Exchange Management Act, 1999.

This article states the position as per the Rules notified on 17 October 2019 (S.O. 3732(E)) as amended by the notifications named in this article; the latest amendment consulted is S.O. 4870(E) dated 2 September 2026. Later amendments, press notes and sector regulators' conditions should be checked before acting. For a route check on a live proposal, see our FEMA advisory service.

Under the automatic route, investment by a person resident outside India does not require the prior approval of the Reserve Bank or the Central Government. Under the Government route, it requires prior Government approval and must follow the conditions stipulated by the Government in its approval. Aggregate foreign portfolio investment up to the sectoral or statutory cap needs neither Government approval nor compliance with sectoral conditions if it does not transfer ownership and/or control from resident Indian citizens to persons resident outside India. Investment under the wrong route is outside what Schedule I permits.

The opening words of paragraph 3

Paragraph 3 is headed "Permitted sectors, entry routes and sectoral caps for total foreign investment". It begins: unless otherwise specified in the Rules or the Schedules, the entry routes and sectoral caps for the total foreign investment in an Indian entity shall be as follows. Two points come from this sentence. The paragraph is a default, which other provisions may displace. And it speaks of "total foreign investment in an Indian entity", not of one investor's holding.

Clause (a) then gives the entry routes and clause (b) the sectoral caps and the Table. Clause (b) is covered in our article on sectoral caps, investing companies and joint audit.

FEMA FilingFEMA & RBI ComplianceFEMA & RBI CompliancesAD Code, ECB, ODI, FEMA filings and advisory.AD CodeECB & ODIFEMA ReturnsGet Expert Support →

The three items of clause (a)

None of the 19 amending notifications up to 2 September 2026 changes items (i) and (ii).

Item (i): the automatic route

"Automatic" means no prior approval of the Reserve Bank or the Central Government. It does not mean no conditions. Clause (b)(ii) of the same paragraph says foreign investment in the listed sectors is subject to applicable laws or regulations, security and other conditionalities, and each Table entry carries its own "Other conditions". Pricing, mode of payment and reporting under the other rules also continue to apply.

The Reserve Bank's Master Direction - Foreign Investment in India, updated up to June 15, 2026, describes the automatic route in paragraph 5.1.1 as one that does not require prior approval from the Central Government. Schedule I itself names both the Reserve Bank and the Central Government.

Item (ii): the Government route

Two things make up the Government route: prior Government approval, and compliance with the conditions stipulated in that approval. An approval is therefore not only a gate; its conditions continue to bind the investment.

What "Government approval" means

Rule 2(v) defines the term as the approval from the erstwhile Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion, Government of India and/or the erstwhile Foreign Investment Promotion Board (FIPB) and/or any of the ministry or department of the Government of India, as the case may be. The Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2026, S.O. 2174(E) dated 1 May 2026, changed the defined words from "government approval" to "Government approval"; that notification prints the clause as "clause (6)" of rule 2, though the definition is clause (v).

The Rules do not set out how an application is made, to whom, or in what time. Those matters are outside Schedule I.

Item (iii): foreign portfolio investment

The Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2024, S.O. 3492(E) dated 16 August 2024, substituted item (iii). The current text has two limbs:

• Aggregate foreign portfolio investment up to the sectoral or statutory cap does not require Government approval or compliance of sectoral conditions, as the case may be, if it does not result in transfer of ownership and/or control of the resident Indian company from resident Indian citizens to persons resident outside India.
• Other investments by a person resident outside India remain subject to the conditions of Government approval and compliance of sectoral conditions as laid down in the Rules.

As notified in 2019, the item was limited to aggregate foreign portfolio investment "up to forty-nine percent of the paid-up capital on a fully diluted basis or the sectoral or statutory cap, whichever is lower". The 2024 text removes the forty-nine percent limb. Paragraph 5.1.4 of the Master Direction, updated up to June 15, 2026, still prints the forty-nine percent wording; the Gazette text of 2024 is the one given above, and readers should confirm against the official text.

"Control" is now defined in rule 2(da); see our article on Indian company, control and investor classes.

How the routes appear in the Table

The Table uses the routes in three patterns:

• a single word, "Automatic" or "Government";
• a split, such as "Automatic up to 49%; Government route beyond 49% and up to 74%" against private sector banking, or "Automatic up to 74%; Government route beyond 74%" against brownfield pharmaceuticals;
• a split with a reason, as in defence, where the Government route beyond 74% applies "wherever it is likely to result in access to modern technology or for other reasons to be recorded".

When the Government route applies regardless of sector

Rule 6(a), as substituted by S.O. 2174(E) dated 1 May 2026, sends some investors to the Government route whatever the Table says. An entity or citizen of a country sharing a land border with India, or an investment whose beneficial owner is a citizen of, or whose beneficial ownership is vested in, such a country, shall invest only under the Government route "specified in sub-clause (ii) of clause (a) of paragraph (3) of Schedule I". The provisos, the Explanations and the reporting requirement are in our article on rule 6 and the land-border countries.

Schedule I itself also requires prior Government approval for foreign investment in financial services not listed under "F" of the Table, and in investing companies not registered as NBFCs and core investment companies.

A worked example

Arden Capital Limited, a foreign company from a country that does not share a land border with India, plans two investments. The first is in Kavach Fabrication Private Limited, a manufacturing company. The Table shows "Automatic" against manufacturing, so no prior approval of the Reserve Bank or the Central Government is needed under item (i). The second is in Tarang Radio Private Limited, an FM radio company; the Table shows "Government", so item (ii) applies and Arden needs prior Government approval and must follow its conditions.

Separately, foreign portfolio investors together hold shares in a listed company in a capped sector. If their aggregate holding stays within the sectoral cap and does not transfer ownership or control from resident Indian citizens to non-residents, item (iii) says that holding needs no Government approval or compliance of sectoral conditions.

Need help working out which route applies?

The route depends on the sector entry, the investor's country and beneficial ownership, and the kind of company receiving the money. Our FEMA advisory team reads all three together and tells you whether prior approval is in play.

Key takeaways

• The automatic route needs no prior approval of the Reserve Bank or the Central Government, but sectoral conditions still apply.
• The Government route needs prior Government approval and continuing compliance with the conditions in that approval.
• "Government approval" is defined in rule 2(v); S.O. 2174(E) dated 1 May 2026 capitalised the term.
• Item (iii) was substituted by S.O. 3492(E) dated 16 August 2024 and no longer prints a forty-nine percent limb.
• Rule 6(a) puts land-border investors on the Government route in every sector.
• The Rules print no approval procedure or time line.

Read next

• Schedule I paragraph 3(b): sectoral caps, investing companies and joint audit
• Schedule I paragraph 2: sectors prohibited for FDI
• Rule 6: who may invest and the land-border provisos
• FDI automatic route and approval route: a general guide

Disclaimer: Based on the Gazette text of the instrument this article names, as notified and as amended by the notifications named in the article (for the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 the latest amendment consulted is S.O. 4870(E) dated 2 September 2026), as consulted on 2 October 2026. There is no official consolidated text; the provisions were read with each amendment applied. Sectoral caps, entry routes, conditions, forms and time limits change by notification, press note and circular; later changes should be checked on the Gazette, DPIIT and Reserve Bank sites. This article is general information, not legal advice; check the official text before acting.