Govt. Allows Bonus Shares in FDI-Prohibited Sectors Without Change in Foreign Holding

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  • Last Updated on 13 June, 2025

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NDI Rules bonus shares amendment

Notification No. S.O. 2549(E); Dated: 11.06.2025

In a significant regulatory update, the Central Government has amended the Non-debt Instruments (NDI) Rules, 2019 to bring them in line with the recent clarification issued by the Reserve Bank of India (RBI).

1. RBI Clarification on Bonus Shares – April 7, 2025

Earlier, the RBI, through Press Note No. 2 dated April 7, 2025, had clarified that an Indian company operating in an FDI-prohibited sector is permitted to issue bonus shares to its existing non-resident shareholders, provided that:

  • The issuance is made from free reserves.
  • The shareholding pattern of non-resident shareholders remains unchanged post-issuance.

This clarification aimed to ensure that such corporate actions do not result in any indirect foreign investment or breach of sectoral caps.

2. Amendment to Non-debt Instruments Rules, 2019

To operationalise the RBI’s clarification, the Central Government has now amended the NDI Rules, 2019, ensuring that the legal framework governing foreign investments aligns with this position. The amendment brings regulatory consistency and removes ambiguity regarding the permissibility of issuing bonus shares in sectors where FDI is restricted.

3. Implication for Indian Companies and Non-Resident Investors

This amendment provides greater clarity and legal certainty for Indian companies in FDI-prohibited sectors intending to undertake bonus issues. It also reassures non-resident investors that their rights can be proportionately maintained without contravening FDI regulations.

Click Here To Read The Full Notification

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied