Education Series on NRIs
NRI refers to Indian citizens who
stay abroad for employment, business, and vacation.
NRI can invest in the following products.
Investments in equities under PIS on BSE and NSE Derivatives trading
on the NSE IPO Portfolio Management Services Investments in Mutual
Funds Trading in International commodities
A citizen of a foreign country (other than a citizen of Bangladesh or
Pakistan) is a PIO if:
He/She at any time held an Indian Passport. OR
He/She or either of his parents or any of his/her grandparents
was a citizen of India; OR
He/She is a Spouse (not being a citizen of Bangladesh or
Pakistan) of an Indian citizen (a) or (b) above.
An NRI should have a bank account (NRE/NRO or both) with
designated bank, which is approved by RBI (Reserve Bank of India)
for this purpose. He should apply for a general approval for
investment in Indian Stock Market through his designated bank
branch. He should open a Demat Account with Competent Finman Pvt.
Ltd. to hold his shares and to execute his buy/sell orders on the
Any NRI/PIO can open two types of savings accounts with any bank
in India. They are NRE and NRO bank accounts.
A NRE bank account is an external saving bank account
opened for Non resident Indians. This is why it is known as
Non-Resident External account. Since it is an external account, any
monies lying in NRE account can be taken outside the country or in
other words, the monies lying in NRE account are fully repatriable.
This money can be converted into any foreign currency at the behest
of the account holder and can be remitted outside the country.
A NRO bank account is an ordinary saving bank account opened for
Non resident Indians. This is why it is known as Non-Resident
Ordinary account. Since it is an ordinary account i.e. as good as a
normal saving bank account, monies lying in NRO account cannot be
taken outside the country or in other words, the monies lying in NRO
account are not repatriable.
Money can be freely transferred from NRE account to NRO account
and vice versa.
RBI has advised banks to re-designate such accounts as
resident accounts on return of the account holder to India.
As per section 6(5) of FEMA, NRI can continue to hold the
securities, which he/she had purchased as a resident Indian, even
after he/she has become a non-resident Indian, but has to transfer
the shares to his NRO (Non Resident Ordinary) account.
NRIs are permitted to make direct investments in shares/
debentures of Indian companies/ units of mutual fund. They are also
permitted to make portfolio investments i.e. purchase of share /
debentures of Indian Companies through stock exchange. These
facilities are granted both on repatriation and non-repatriation
Yes. NRI can subscribe to IPO without any permission. The issuing
company is required to take specific or general permission from GOI/RBI.
Portfolio Investment Scheme (PIS) is a scheme of the Reserve Bank
of India (RBI) defined in Schedule 3 of Foreign Exchange Management
Act 2000 under which the ‘Non Resident Indians (NRIs)’ and ‘Person of
Indian Origin (PIOs)’ can purchase and sell shares and convertible
debentures of Indian Companies on a recognized stock exchange in India
by routing all such purchase/sale transactions through their account
held with a Designated Bank Branch.
- PIS account is applicable only for NRIs and not for resident
- It is only for trading in Indian markets and not any other foreign
- It is applicable only for equity trades and not MF investments.
* Any NRI or a PIO wanting to trade/make fresh investments in the
Indian Equity Secondary Market needs and must have one PIS account
with only one designated bank in India.
* NRI/PIO can open only one PIS account with any designated banks in a
prescribed format for PIS account, upon which the bank can issue a PIS
approval letter to the investor.
* Non-PIS is a normal savings bank account, which can be opened with
any bank in India. Non-PIS is an account for which the transactions
are not reported to RBI. This account takes care of selling all those
shares, which are not allowed under PIS. Shares acquired under IPO or
received as gift or bought as resident Indian can be sold under
* There are two types of NON PIS account NRE NON PIS account NRO NON
* Following transactions are allowed under NON PIS account?
- Sale of shares, which were, acquired other than PIS.
- Shares acquired through IPO’s.
- Gifts from relatives or otherwise.
- Shares bought as resident Indian.
- Fresh acquisition through IPO’s.
- Investment in Mutual Funds
As per the regulations NRIs are allowed to invest up to a
certain percentage of the total paid up capital of the company by
directly subscribing to the equity/convertible debentures of the
company either though a public offering made by the company or
through private placements on one to one basis. Regulations provide
for different ceilings on such investments based on the industry to
which the company belongs and also the nature of investments
(repatriation / non-repatriation basis).
Investments made by NRIs though subscription to Initial
Public Offerings (IPO’s) or private placements are not covered by
Portfolio Investment Scheme. Such investments are covered by RBI's
regulations with regard to Foreign Direct Investments.
NRIs do not need approvals from RBI for selling securities
acquired through IPO’s/Private Placement. NRIs can sell such
shares/debentures on the Exchange without any approval. However,
while seeking the credit of sale proceeds to NRE/NRO
account, the bank should be provided with the details regarding
date of allotment and cost of acquisition to calculate the taxes, if
Investment can be made on repatriation as well as
non-repatriation basis. However, an NRI will have to open NRE
account as well as NRO account with designated bank branch as the
sale proceeds of non repatriation investment can only be credited to
The repatriation of the sale proceeds, net of taxes, are
allowed if the original purchase was made on repatriation basis and
such investments were made out of funds from NRE/FCNR account or by
means of remittance from abroad.
Corporate benefits may be in the form of dividend, interest,
rights, bonus, etc. Any corporate benefit resulting out of
investment in securities on non-repatriation basis will not carry
the right of repatriation. Similarly any corporate benefit resulting
out of investment in securities on repatriation basis will carry the
right of repatriation. This is subject to change depending on
prevailing RBI regulations.
Securities received against investments under ‘Foreign Direct
Investment scheme (FDI)’, ‘Portfolio Investment scheme (PIS)’ and
‘Scheme for Investment’ on non – repatriation basis have to be
credited into separate demat accounts. Investment under PIS could be
on repatriation or non – repatriation basis. Investment under FDI
scheme is on repatriation.