Government Eases FDI Norms for Issuance of Bonus Shares in Restricted Sectors

The Indian government has clarified rules allowing companies in sectors where foreign direct investment (FDI) is prohibited to issue bonus shares to existing foreign shareholders, ensuring no change in shareholding patterns. This move aims to streamline processes and boost investor confidence in sensitive sectors.

The government has clarified that Indian companies operating in sectors where foreign direct investment (FDI) is prohibited can issue bonus shares to existing foreign investors. This is contingent on maintaining the current shareholding pattern.

The Department for Promotion of Industry and Internal Trade (DPIIT) has stated that the issuance must adhere to relevant regulations. The clarification addresses how Indian companies can issue bonus shares to foreign shareholders, even in sectors where FDI is banned.

Some sectors where FDI is generally prohibited include lotteries, gambling, and tobacco manufacturing. This clarification enhances the ease of doing business by simplifying corporate actions and ensuring equity in shareholder rights. Experts have welcomed the move, highlighting its potential to increase investor confidence in restricted industries.

(With inputs from agencies.)