On June 11, 2025, the Ministry of Finance notified an amendment to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (“NDI Rules”), allowing Indian companies engaged in FDI-prohibited sectors or activities to issue bonus shares to their pre-existing non-resident shareholders.
FDI inflow in India increased from USD 36.05 billion in 2013–14 to a record USD 84.84 billion in 2021–22 thanks to the government’s efforts to reform FDI policies; provisional data indicates that inflows increased by 26% in the first half of FY 2024–25 compared to the same period in FY 2023–24.
The Department for Promotion of Industry and Internal Trade (“DPIIT”) is responsible for formulating India’s FDI policy. It issues policy pronouncements through the Consolidated FDI Policy Circular, Press Notes, and Press Releases. These are notified as amendments to the NDI Rules by the Department of Economic Affairs, Ministry of Finance, under the Foreign Exchange Management Act, 1999 (“FEMA”).
The new provision stipulates that such bonus share issuances are allowed only if the shareholding pattern of the non-resident shareholders does not change as a result of the issuance. This ensures that the amendment provides operational flexibility without contravening the core intent of FDI prohibitions in these sensitive sectors.
FDI remains prohibited in lottery business, gambling and betting, chit funds, real estate business, tobacco manufacturing, and other sectors as outlined in Paragraph (2) of Schedule I of the NDI Rules and Paragraph 5.1 of the FDI Policy.