The upcoming bonus issue by HDFC Bank, its first-ever in history, has triggered an unexpected regulatory dilemma for China’s central bank, the People’s Bank of China (PBoC), which holds nearly 0.5% stake in the bank through the Foreign Portfolio Investor (FPI) route. As per India’s Press Note 3 policy—introduced in April 2020 in the wake of national security concerns—any investment, however indirect or automatic, from countries sharing land borders with India requires prior government approval. While bonus shares are typically considered a shareholder entitlement and do not alter the ownership percentage or involve any fresh capital inflow, the legal language of the regulation doesn’t clearly exempt non-cash corporate actions like bonus or stock splits. This puts entities like the PBoC in a grey zone: although no additional investment is being made, the mere issuance of new shares could potentially be interpreted as an expansion of ownership, triggering the need for regulatory clearance. The situation underscores a critical gap between policy intention and legal interpretation, raising broader questions about how India views passive investments from countries like China in strategically significant sectors such as banking. It also puts pressure on regulatory bodies and the government to clarify their stance—either by explicitly exempting such transactions or by enforcing Press Note 3 in a literal sense, which could complicate similar corporate actions for other foreign investors from “border-sharing nations.” As HDFC Bank’s board meets on July 19 to finalize the bonus and quarterly earnings, the markets will be closely watching whether New Delhi makes a policy exception or maintains a firm geopolitical line.