Rule 34 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
On 24 January 2024, S.O. 332(E) added a new Chapter X, rule 34, and a new Schedule XI to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. Together they set up the Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme. Rule 34 lets a "permissible holder" buy and sell equity shares of a public Indian company listed or to be listed on an International Exchange. Paragraphs 1 and 2 of Schedule XI say how a public Indian company may issue or offer shares and who a permissible holder is. Eligibility, voting rights and pricing, in paragraphs 3 to 6, are in the companion article.
This article is based on the Rules as notified on 17 October 2019 (S.O. 3732(E)) as amended by the notifications named in this article; the latest amendment consulted is S.O. 4870(E) dated 2 September 2026. Rule 34 and Schedule XI are as inserted by S.O. 332(E) of 24 January 2024; none of the later notifications to 2 September 2026 changes them. Amendments made after that date should be checked in the Gazette. There is no official consolidated text. For advice on a listing plan, see our FEMA advisory service.
Rule 34(1): a permissible holder may purchase or sell equity shares of a public Indian company listed or to be listed on an International Exchange under the Scheme in Schedule XI. Rule 34(2): the mode of payment and attendant conditions for remittance of proceeds of issue are as specified by the Reserve Bank. Schedule XI paragraph 1: a public Indian company may issue equity shares or offer shares of existing shareholders, subject to prohibited activities and sectoral caps in paragraphs 2 and 3 of Schedule I, in dematerialised form ranking pari passu with shares listed in India, with prior Government approval wherever applicable. Paragraph 2: a permissible holder is a holder of the shares listed on the exchange, including its beneficial owner, who is not a person resident in India.
What S.O. 332(E) changed
S.O. 332(E), the Foreign Exchange Management (Non-debt Instruments) Amendment Rules, 2024 (24 January 2024), made by the Central Government under clauses (aa) and (ab) of sub-section (2) of section 46 of the FEMA read with sub-section (3) of section 23 of the Companies Act, 2013, did four things:
- Inserted rule 2(aaa), "International Exchange": a permitted stock exchange in permissible jurisdictions which are listed at Schedule XI.
- Substituted rule 2(ag), "listed Indian company": an Indian company which has any of its equity instruments or debt instruments listed on a recognised stock exchange in India and on an International Exchange. The substituted wording differs from the Master Direction's shorter form, as explained in our article on FDI, foreign portfolio investment and the sectoral cap; the reader should confirm the current text.
- Inserted rule 2(aka), "permissible jurisdiction": a jurisdiction notified by the Central Government under sub-clause (f) of sub-rule (3) of rule 9 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005. The list of such jurisdictions is not in the texts consulted.
- Inserted Chapter X (rule 34) and Schedule XI.
The Notes at the end of S.O. 332(E), S.O. 1361(E) and later notifications cite the April 2022 amendment as "S.O. 1202 (E)"; its own heading and the later Notes print S.O. 1802(E). This article uses 1802.
Rule 34: investment by a permissible holder
Chapter X is headed "Investment by permissible holder in equity shares of public companies incorporated in India and listed on International Exchanges". Rule 34, "Investment by permissible holder", has two sub-rules:
- (1) A permissible holder may purchase or sell equity shares of a public Indian company which is listed or to be listed on an International Exchange under the Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme as specified in Schedule XI.
- (2) The mode of payment and other attendant conditions for remittance of proceeds of issue shall be as specified by the Reserve Bank.
The Mode of Payment and Reporting of Non-Debt Instruments Regulations, 2019, as updated, carry a Schedule XI on the mode of payment; the Reserve Bank's Master Direction - Foreign Investment in India, updated up to June 15, 2026, repeats it in Annex 11. As the Master Direction states them (these are not in the Rules): consideration for purchase or subscription is paid as inward remittance from abroad through banking channels or out of funds in a repatriable foreign currency or Rupee account under the Deposit Regulations, 2016, or through banking channels to a foreign currency account of the Indian company held under the 2015 foreign currency accounts regulations; proceeds are to be remitted to a bank account in India or deposited in that foreign currency account; and sale proceeds, net of taxes, may be remitted outside India or credited to the permissible holder's bank account maintained under the Deposit Regulations. See our article on payment and issue of shares under regulation 3.
Schedule XI paragraph 1: issue and listing
Paragraph 1 is headed "Issue and Listing on International Exchanges". A public Indian company may issue equity shares or offer equity shares of existing shareholders, subject to these conditions:
| Item | Condition |
|---|---|
| (i) | The issue or offer of equity shares of existing shareholders shall be permitted and such shares shall be listed on any of the specified International Exchange |
| (ii) | The issue or offer is subject to prohibited activities and sectoral caps prescribed in paragraphs 2 and 3 of Schedule I |
| (iii) | The shares issued by the public Indian company or offered by its existing shareholders on an International Exchange shall be in dematerialised form and rank pari passu with equity shares listed on a recognised stock exchange in India |
Proviso: the prior Government approval, wherever applicable, shall be obtained.
The prohibited sectors are in Schedule I paragraph 2 and the sectoral caps in Schedule I paragraph 3 and the Table articles that follow it. The Rules do not describe an approval procedure.
Schedule XI paragraph 2: the permissible holder
Clause (a). "Permissible holder" means a holder of equity shares of the company which are listed on an International Exchange, including its beneficial owner.
Proviso: a holder who is a citizen of a country which shares land border with India, or an entity incorporated in such a country, or an entity whose beneficial owner is from such a country, shall hold equity shares of the public Indian company only with the approval of the Central Government. This follows the pattern of rule 6(a), explained in our article on land border countries.
Explanation 1. For this clause, a permissible holder is not a person resident in India.
Explanation 2. The permissible holder, including its beneficial owner, shall be responsible for ensuring compliance with this requirement. The public Indian company, in its offer document, by whatever name called in the permissible jurisdiction, shall make a disclosure to this effect.
Clause (b). A permissible holder may purchase or sell equity shares of an Indian company listed on an International Exchange subject to the limit specified for foreign portfolio investment under the Rules. Foreign portfolio investment is explained in our article on rule 2, and the limits in Schedule II.
The Annexure: List of International Exchanges
The Annexure to Schedule XI lists one entry: the International Financial Services Centre in India, naming India International Exchange and NSE International Exchange. The list should be checked for changes made after 2 September 2026.
The rest of the scheme
Paragraphs 3 to 6 deal with eligibility, obligations of companies, voting rights and pricing, and the defined terms; see our article on eligibility, voting rights and pricing for direct listing. The Companies Act side of an offer document is in our guide on private placement under section 42; the schemes under SEBI and the Ministry of Corporate Affairs norms cited in paragraph 3 are not in the texts consulted.
A worked example
Lakshya Components Limited, a public Indian company in a sector open to foreign investment, wishes to list its shares on one of the exchanges named in the Annexure. Under paragraph 1 it must issue in dematerialised form, ranking pari passu with its shares in India, within the prohibited activities and sector caps of Schedule I, and obtain prior Government approval wherever applicable. A holder in the listing is a permissible holder if not resident in India. If that holder is, or has a beneficial owner from, a country sharing a land border with India, it can hold the shares only with the Central Government's approval, and Lakshya's offer document must disclose the requirement.
Need help with a direct listing under FEMA?
A direct listing brings together company law, securities regulation and FEMA. Our FEMA advisory team can test the plan against Schedule XI before the listing process begins.
Key takeaways
- S.O. 332(E) of 24 January 2024 inserted rule 34, Schedule XI, and the definitions of International Exchange and permissible jurisdiction.
- A permissible holder may buy and sell the equity shares of a public Indian company listed or to be listed on an International Exchange.
- Shares must be dematerialised and rank pari passu; Schedule I prohibited activities and caps apply; Government approval is needed wherever applicable.
- A land-border holder needs the Central Government's approval.
- The Annexure names the exchanges at the International Financial Services Centre in India.
Read next
- Schedule XI to the FEM (Non-debt Instruments) Rules, 2019: eligibility, voting rights and pricing for direct listing
- Rule 6 of the FEM (Non-debt Instruments) Rules, 2019: who may invest and the land-border countries
- Rules 10 and 11 of the FEM (Non-debt Instruments) Rules, 2019: FPI investment and transfer
- Section 6 of the FEMA, 1999: capital account transactions, debt and non-debt instruments
Disclaimer: Based on the Gazette text of the instrument this article names, as notified and as amended by the notifications named in the article (for the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 the latest amendment consulted is S.O. 4870(E) dated 2 September 2026), as consulted on 2 October 2026. There is no official consolidated text; the provisions were read with each amendment applied. Sectoral caps, entry routes, conditions, forms and time limits change by notification, press note and circular; later changes should be checked on the Gazette, DPIIT and Reserve Bank sites. This article is general information, not legal advice; check the official text before acting.