The government has clarified the rules for issuing bonus stocks to foreign investors in FDI limited sectors

New -Delhi, April 8 (IANS). The central government on Tuesday made it clear that Indian companies operating in areas where direct foreign investment (FDI) are not allowed to be bonus shares to their existing foreign shareholders. However, it will only be allowed if the total shareholding pattern is unchanged. The Department of Industries’ promotion and internal trade (DPIIT) said that all relevant laws and regulations should be followed in such transactions. Dpiit said in a note: “The rules, laws, regulations and guidelines that apply to the issuance of bonus shares must be followed.” This explanation is now officially part of the FDI policy. With the move, companies from limited sectors such as lottery, gambling, kit funds and tobacco product manufacturing bonus shares can issue bonus shares to non-resident shareholders. The most important condition is that no new foreign investment should be added and that the percentage of foreign and Indian investors should remain the same. The DPIIT said: “The Indian company has allowed the banned sector/activity for FDI to issue bonus shares to its existing non-resident shareholders, provided there is no change in the shareholding of non-resident shareholders after the bonus shares are issued.” The DPIIT further said: “This explanation is related to permission to issue bonus shares to existing foreign shareholders through Indian businesses involved in limited areas for FDI.” Most of the areas in India allow FDI on automatic route, where investors only need to inform the Reserve Bank of India (RBI) after investing. Under the approval of the government, a foreign investor will have to take the consent of the ministry or department in advance. In some areas such as telecommunications, media, pharmaceuticals and insurance, government approval is needed. Some sensitive areas do not allow any foreign investment. FDI is considered important for the economic growth of India, especially for the development of infrastructure. It also helps to manage the country’s payment balance and supports the value of the Indian rupee. -Ians skt/abm