NRI trading account can be opened by NRI’s for buying and selling shares and convertible debentures of Indian Companies. Same procedure is applicable for PIO (Persons of Indian Origin) and OCI (Overseas Citizen of India). Shares and convertible debentures can be bought only on recognized stock exchange in India. Other securities that can be bought are Exchange Traded Funds (ETF), treasury bills, Government dated securities (with exception of bearer securities). NRI trading account holders can also transact in Mutual fund units of domestic domestic funds, PSU bonds and Disinvestment shares offered by Government of India in Public Sector enterprises. These can be bought in NRI trading account both on repatriation and / or Non – repatriation basis.
Before opening NRI trading account, it should be noted that NRI can buy/sell shares and convertible debentures only through Portfolio Investment Scheme (PIS) of Reserve Bank of India. RBI authorized designated branches to route NRI investments in PIS. NRI/PIO must approach such designated bank branch which is authorized under PIS scheme. NRI’s can have two separate trading accounts one each for NRE and NRO accounts.
The following documents must be submitted for opening NRI trading account by NRI/PIO/OCI.
Proof 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 following
• Place of Birth as India in foreign passport
• Copy of PIO / OCI Card as applicable in case of PIO/OCI
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 depository and bank accounts.
Limitations in NRI trading account
– Can not short sell shares (Without holding shares in their account)
– Intra day trading is not allowed in NRI trading account.
– Can not buy securities which are in RBI ban list ( NRI ban list company list )
– Cannot trade in commodity and currency segments
– Only NRO (Non Resident Ordinary) accounts are permitted to trade in future and option segment. Further, it should be on repatriation basis out of funds in Indian Rupees. For this separate Custodian Participant code is required which need to be obtained while opening NRI trading account
– Sufficient and Clear funds are required to be maintained in PIS account before placing orders.
Payments for purchases on repatriation basis can be done with inward remittance of foreign exchange or with funds in NRE or FCNR(B). For non-repatriation account, payments can be done either from above source or with funds in NRO account. Sale proceeds (net of taxes) of NRI trading account will be credited only to NRO account if account type is non-repatriation. If NRI trading account is on repatriation basis, they will be credited to any of NRE/NRO/FCNR(B) accounts.
NRI’s need not to apply for permission to apply for public issues, if such offer is made by companies. While getting credit in account, they need to inform designated branch about transaction details to calculate taxes. Shares purchased can be sold only on stock exchanges and can not make any private agreements in this regard nor be gifted without prior approval of Reserve Bank of India. Anyhow, NRI’s can transfer to their relatives as defined in Section 6 of Companies Act, 1956 or to a charitable trust duly registered under the laws in India.
These are simplified steps to invest in Indian markets by NRI’s.
1. Open bank account in a branch of designated bank by RBI.
2. Apply for a general approval for investment in Indian Stock Market through the bank branch.
3. Open a Demat A/C with any depository participant.
4. Open trading account with registered stock broker for carrying transactions on stock exchanges.