FAQs FOR NRI - TRADING
Q1 Who is a non-resident Indian (NRI)?
Ans Non-Resident Indian (NRI) means a “person resident outside India”
who is a citizen of India or is a person of Indian origin"[as per FEMA
Q2 Can NRI invests in shares in India through a stock exchange?
Ans Yes, NRI can purchase shares or convertible debenture of an Indian
Company through stock exchanges, under the portfolio investment scheme
on repatriation and /or non repatriation basis.
Q3 Can NRI/PIO invests in other securities?
Ans Yes, NRI/PIO can invest in other securities namely
Dated Government securities (other than bearer securities) or
Units of domestic mutual funds.
Bonds issued by a public sector undertaking (PSU) in India.
Shares in Public Sector Enterprises being disinvested by the
Government of India.
Q4 Are NRIs allowed to invest in Exchange Traded Funds (ETFs)?
Ans Yes, NRIs are allowed to Invest in Exchange Traded Funds (ETFs).
NRIs can invest in ETFs both on repatriation as well as non
Q5 How can NRIs invest in shares in India?
Ans As per Reserve Bank of India (RBI) guidelines, NRI who wishes
to invest in shares in India through a stock exchange need to approach
the designated branch of any authorized dealer (bank) authorized by
reserve bank to administer the PIS (Portfolio Investment Scheme) to
open a NRE (Non Resident External) /NRO (Non Resident Ordinary)
account under the scheme for routing Investments.
Q6 What is a designated bank branch?
Ans Reserve bank of India has authorized few branches of each
authorized dealer bank to conduct the business under portfolio
investment scheme on behalf of NRIs. NRI can select only one
authorized dealer bank for the purpose of investments under portfolio
investment scheme and route the transactions through the branch
designated by the authorized dealer bank.
Q7 What is a Portfolio Investment Scheme (PIS)?
Ans Portfolio Investment Scheme (PIS) is a scheme of reserve bank of
India under which -
Non Resident Indian (NRIs) can purchase/sell shares/convertible
debentures of Indian companies on Stock Exchanges under Portfolio
Investment Scheme. For this purpose, the NRI/PIO has to apply to a
designated branch of a bank, which deals in Portfolio Investment. All
sale/purchase transactions are to be routed through the designated
Q8 Who is a person of Indian Origin?
Ans For the purposes of investments in shares/securities in India,
person of Indian origin means a citizen of any country other than
Pakistan or Bangladesh, if
he at any time, held an Indian passport; or
he or either of his parents for any of his grand parents was a
citizen of India by virtue of the constitution of India or
Citizenship Act, 1955 (57 of 1995); or
the person is a spouse of an Indian citizen or a person referred to
in clause (a) or (b)
Q9 Who is an overseas citizen of India (OCI)?
Ans Under OCI Scheme operational from 02nd Dec 2005 government of
India decided to grant overseas citizenship of India (OCI) commonly
known as “dual citizenship”. A foreign national, who was eligible to
become a citizen of India on 26.01.1950 or was a citizen of India on
or at anytime after 26.01.1950 or belonged to a territory that became
part of India after 15.08.1947 and his/her children and grand
children, provided his/her country of citizenship allows dual
citizenship in some form or other under the local laws, is eligible
for registration as an Overseas Citizen of India (OCI). Minor children
of such person are also eligible for OCI. However, if the applicant
had ever been a citizen of Pakistan or Bangladesh, he/she will not be
eligible for OCI.
Q10 Can PIO (Person of Indian Origin) as well as OCI (Overseas
Citizen of India) also invest in shares in India?
Ans Yes, PIOs and OCIs do have a parity with NRIs in respect of
all facilities available to the NRIs in the economic, financial and
educational fields except in matters relating to the acquisition of
agricultural/ plantation properties.
Q11 What is an Overseas Corporate Body (OCB)?
Ans ‘Overseas Corporate Body’ means a company, partnership firm,
society and other corporate body owned directly or indirectly to the
extent of at least sixty percent by Non-Resident Indians and includes
overseas trust in which not less than sixty percent beneficial
interest is held by NonResident Indians directly or indirectly but
Q12 Can Overseas Corporate Body (OCBs) also invest in shares in
Ans OCBs have been prohibited from making investments under Portfolio
Investment Scheme. OCBs have been de-recognized as a class of investor
entity w.e.f. September, 16, 2003. Further, the OCBs which have
already made investments under the PIS are allowed to continue holding
such shares /convertible debentures till such time these are sold on
the stock exchange.
Q13 What are the documents required to be collected from Investor
to open a NRI/PIO/OCI trading account?
Ans List of documents to be taken while registering NRI/PIO/OCI
Clients as may be applicable
Document ensuring status of entity
In case of Indian passport - Valid passport, Place of birth as
India, Valid Visa – Work/Student/employment/resident permit etc.
In case of foreign passport : Valid passport and any of the
PIS Permission Letter from the respective designated bank
Overseas Address Driving License/ Foreign passport /Utility Bills/
Bank statement (not more than 2 months old)/ Notarized copy of rent
agreement/ leave & license agreement/ Sale deed.
Photograph of Investor.
Proof of respective bank accounts & depository accounts.
Q14 What are other client registration formalities to be taken care
while registering NRI/PIO/OCI Clients?
Ans In case of NRI/PIO/OCI client registration documents are required
to be executed by client himself and not by Power of Attorney Holder.
In case of In-person verification of such clients, the members may
obtain from such clients KYC documents attested by any one of the
following entities – Indian Embassy/Consulate general in the country
where the client resides, Notary Public, Court, Magistrate, Judge or
Q15 Is it mandatory for a client to provide local (Indian) address?
Ans At the time of client registration, client needs to provide its
foreign address along with documentary proof of the same. If client so
desire it can keep its local address as correspondence address. In
such scenario additionally they are required to provide documentary
evidence in support of local address also.
Q16 Can two separate trading accounts namely (NRE & NRO) can be
opened by NRI?
Ans Yes, clients can have two separate trading accounts based on NRE &
Q17 What are the additional requirement with respect to contract
Ans Contract notes in original for both purchase and sale transactions
needs to be submitted with in the time specified by the designated
bank to enable designated banks to report the same to Reserve Bank of
Q18 What precautions trading member needs to take while dealing
with NRI Clients?
Ans Trading member need to ensure that
Securities are not in RBI ban list before executing the order.
Clear funds are available for purchases.
Securities are available before executing any sell order.
Depending upon whether the purchases are made on repatriation /
non-repatriation basis pay-out of the securities needs to be
transferred to respective de-mat account.
Purchase/Sale transactions in cash segment should be settled by
Q19 Is there any ceiling on the Investments under the Portfolio
Ans NRIs are allowed to invest in shares of listed Indian companies in
recognized Stock Exchanges under the PIS.
NRIs can invest through designated ADs, on repatriation and
nonrepatriation basis under PIS route up to 5 per cent of the paid-
up capital / paid-up value of each series of debentures of listed
The aggregate paid-up value of shares / convertible debentures
purchased by all NRIs cannot exceed 10 per cent of the paid-up
capital of the company / paid-up value of each series of debentures
of the company.
The aggregate ceiling of 10 per cent can be raised to 24 per cent,
if the General Body of the Indian company passes a special
resolution to that effect.
Q20 How payments could be made by NRIs for shares purchased on
Ans Payment for purchase of shares and/or debentures on repatriation
basis has to be made by way of inward remittance of foreign exchange
through normal banking channels or out of funds held in NRE/FCNR(B)
account maintained in India. If the shares are purchased on
non-repatriation basis, the NRIs can also utilize their funds in NRO
account in addition to the above.
Q21 How NRIs/PIO can remit Sale proceeds?
Ans. In case of NRI/PIO, if the shares sold were held on repatriation
basis, the sale proceeds (net of taxes) may be credited to his NRE /FCNR(B)/NRO
accounts of the NRI/PIO, whereas sale proceeds of non repatriable
investment can be credited only to NRO accounts
Q22 Can an NRI transfer shares purchased under PIS to others under
Ans Shares purchased under PIS on stock exchange shall be sold on
stock exchange only. Such Shares cannot be transferred by way of sale
under private arrangement or by way of gift (except by NRIs to their
relatives as defined in Section 6 of Companies Act, 1956 or to a
charitable trust duly registered under the laws in India) to a person
resident in India or outside India without prior approval of the
Q23 Can an NRI purchase securities by subscribing to public issue?
What are the permissions/approvals required? How can those shares be
Ans Yes. The issuing company may issue shares to NRI on the basis of
specific or general permission from GoI/RBI. Therefore, individual NRI
need not obtain any permission. While seeking the credit of sale
proceeds to NRE/NRO account, the designated bank should be provided
with the details regarding date of allotment and cost of acquisition
to calculate the taxes, if any.
Q24 Can NRI do Intra-day transactions in cash segment?
Ans No, NRI Investor has to take delivery of shares purchased and give
delivery of shares sold. Short Selling is not permitted.
Q25 Can NRI trade in futures & options segment of the Exchange?
Ans Yes, NRIs are allowed to invest in futures & options segment of
the exchange out of Rupee funds held in India on non repatriation
basis, subject to the limits prescribed by SEBI.
Q26 Can NRI trade in Currency derivative segment of the Exchange?
Ans No, Only “a person resident in India” as defined in section 2(v)
of FEMA Act 1999 are allowed to participate in currency derivative
segment of the Exchange.
Q27 Can trading account be opened for person’s resident outside
India who had been allotted shares under ESOP scheme?
Ans Listed Indian companies are allowed to issue shares under the
Employees Stock Option Scheme (ESOPs), to its employees or employees
of its joint venture or wholly owned subsidiary abroad who are
resident outside India, other than to the citizens of Pakistan.
Trading account can be opened for person’s resident outside India only
for the sole objective of selling of shares acquired under ESOP
Q28 Can rights/bonus shares be issued to NRI?
Ans FEMA provisions allow Indian companies to issue Rights / Bonus
shares to existing non-resident shareholders, subject to adherence to
sectoral cap as may be applicable
Q29 What needs to be done by NRIs for trading in Futures & Options
segment of the Exchange?
Ans An NRI, who wishes to trade on the F&O segment of the
exchange, is required to approach the exchange through a clearing
member, through whom the NRI would like to clear his trades for
allotment of custodial participant (CP) code. Clearing corporation
would assign a CP code to each NRI, based on the application received
from the clearing member of the NRI. Trading members should ensure
that at the time of order entry CP Code of the NRI is placed in the CP
Code field of the trading system. The NRI client shall have only one
clearing member at any given point of time
Q30 What are the limits applicable to NRI in Exchange Traded
Ans Position limits would be applicable on the combined position in
all derivative contracts on an underlying stock at an Exchange.
Position limits for NRIs shall be same as the client level position
limits specified by SEBI from time to time.
For Index based contracts - Disclosure requirement for any
persons or persons acting in concert who together own 15% or more of
the open interest of all derivative contracts on a particular
For Stock option and single stock futures contracts – The gross
open position across all the derivative contracts for a security for
each specific client shall not exceed higher of:
Client level position limits security-wise, are made available to
members on NSE’s website (www.nseindia.com).
Q31 How Investment positions of NRIs are monitored?
Ans Reserve Bank monitors the investment position of NRIs/FIIs in
listed Indian companies, reported by designated banks, on a daily
basis. When the total holdings of NRIs/FIIs under the Scheme reaches
the limit of 2 percent below the sectoral cap, Reserve Bank will issue
a notice (caution list) to all designated branches of designated banks
cautioning that any further purchases of shares of the particular
Indian company will require prior approval of the Reserve Bank.
Once the shareholding by NRIs/FIIs reaches the overall ceiling /
sectoral cap /statutory limit, the Reserve Bank places the company in
the Ban List. Once a company is placed in the Ban List, no NRI can
purchase the shares of the company under the Portfolio Investment
Scheme. List of caution/banned RBI scrip is available at
Q32 In case a person who is resident in India becomes a
non-resident, will he/she be required to change the status of his/her
holding from Resident to Non-Resident?
Ans 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, on a non-repatriable basis.
Q33 In case a non-resident Indian becomes a resident in India, will
he/she be required to change the status of his/her holding from
NonResident to Resident?
Ans. Yes. It is the responsibility of the NRI to inform the change of
status to the designated authorized dealer branch, through which the
investor had made the investments in Portfolio Investment Scheme and
the DP with whom he/she has opened the demat account. Subsequently, a
new demat account in the resident status will have to be opened,
securities should be transferred from the NRI demat account to
resident account and then close the NRI demat account.
Q34 In case a non-resident Indian becomes a resident in India or
vice versa, will he/she be required to open a new trading account?
Ans Yes, Trading member needs to open a new trading account which
needs to be uploaded with the new category code (01 – Resident
Individual) & (11 – NRI) as may be applicable.
RBI Master Circular dated RBI/2010-11/13 dated July 01, 2010.
FAQ hosted on RBI website
NSE Circular dated Nov 27,2003 , NSE/INVG/2003/4593
NSE Circular dated Dec 21,2004 , NSE/MEM/5676
NSE Circular dated Jul 04,2008 , NSE/INSP/10938
This FAQ is prepared based on Exchange’s understanding of FEMA
regulations. While utmost care has been exercised while developing the
FAQs, NSE does not warrant the completeness or accuracy of the
information and disclaims all liabilities, losses and damages arising
out of the use of this information. The readers are requested to keep
abreast of the changes taking place in the underlying provisions of