Finance Ministry Allows Bonus Shares In FDI-Restricted Sectors

New Delhi, Jun 13 (KNN) The Finance Ministry has modified foreign direct investment regulations to permit Indian companies operating in sectors where FDI is prohibited to issue bonus shares to existing non-resident shareholders.

The amendment was announced through the Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2025, which became effective June 11.

Under the new framework, companies can distribute bonus shares to their current non-resident investors, provided the shareholders' ownership percentages remain constant following the issuance.

The ministry emphasised that the proportional stakes of such shareholders must not change despite the bonus share allocation.

Industry experts view the regulatory change as providing companies with enhanced flexibility for equity restructuring while maintaining compliance with existing FDI policies.

The modification is expected to improve capital management practices for businesses operating in sectors with foreign investment restrictions.

The amendment follows similar regulatory relief introduced by the Department for Promotion of Industry and Internal Trade in April, which addressed comparable concerns in the broader FDI policy framework.

The Finance Ministry implemented these changes by incorporating a new sub-rule into the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

The notification includes retrospective provisions, stating that bonus shares issued to qualifying shareholders before the rule's implementation will be considered compliant with current regulations and related guidelines.

This provision offers clarity for companies that may have issued such shares in recent periods.

The regulatory adjustment represents part of the government's continued efforts to liberalise equity investment rules and enhance India's attractiveness to foreign capital.

The move reflects ongoing policy initiatives aimed at streamlining investment procedures while maintaining sectoral investment controls where deemed necessary for national interests.

(KNN Bureau)