FDI Rules eased: Foreign Investors can be given Bonus Shares in Restricted Sectors:

FDI Rules eased: Foreign Investors can be given Bonus Shares in Restricted Sectors The Ministry of Finance issued an official notification dated June 11, 2025, regarding the key amendment introduced to an existing Foreign Exchange Management (Non-debt Instruments) Rules, 2019, by the Central Government of India in its exercise of powers described under clauses (aa) and (ab) of sub-section (2) of section 46 of the Foreign Exchange Management Act, 1999 (42 of 1999). This change is technical but useful for companies that are not allowed to take new FDI but already have some foreign investors; they can now reward them with bonus shares without legal confusion.

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What Is Being Amended?

The Central Government of India has introduced a few key amendments to the existing Foreign Exchange Management (Non-debt Instruments) Rules, 2019. Specifically, it added a new rule under Rule 7.

What Does the New Rule Say?

The introduced amended new rule says: 1. (a) These rules may now be called as the "Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2025." (b) These amended rules will be made effective from the date it is published in the official government Gazette, i.e., 11th June 2025. 2. If an Indian company operates in a sector where foreign direct investment (FDI) is not allowed, it can still issue bonus shares to its existing foreign shareholders. But there's a condition: the ownership percentage of foreign shareholders must not change because of the bonus shares. In other words, they can get free shares (bonus), but not more control in the company. Also, any bonus shares given to foreign investors in the past (before this rule started) will now be considered valid in reference to the provisions of these rules or the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 or the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, as if they were already following the rules, even if this new rule didn’t exist at that time. Refer to the official notification for complete information.