An NRI is an Indian citizen who stays outside India For the purpose of employment, business or vocation, or Under circumstances indicating an intention to stay outside India for an uncertain duration, or Any Indian citizen posted outside India for a temporary period in connection with employment.
A citizen of a foreign country (other than Pakistan and Bangladesh) is a PIO if; (a) He/she at any time held an Indian passport, or (b) He /she or either of his/her parents or any of the grandparents was citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955, or (c) Spouse (not being a citizen of Pakistan or Bangladesh) of an Indian citizen or of (a) or (b)
Broadly, NRIs may invest under the Portfolio Investment Scheme (buying through the secondary market) and through the Direct Subscription Route (Investments though IPOs).
Portfolio Investment Scheme (PIS) is a scheme of the Reserve Bank of India (RBI) laid down in Schedule 3 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 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.
For all the Indian companies or companies listed on Indian stock exchanges, there are certain limits of foreign investment, which are to be monitored under FEMA regulations. Any NRI or a PIO cannot invest more than 5% of the paid up equity capital in any Indian company.
An NRI should open a new bank account with designated bank branch, which is approved by RBI (Reserve Bank of India) for this purpose. (a) He should apply for a general approval for investment in Indian Stock Market through his designated bank branch. (b) He should open a Demat Account with a Depository Participant in India to hold his shares. (c) He should register with a stock broker in India to execute his buy/sell orders on the stock exchange(s).

Two types of rupee accounts viz. Non Resident (external) Rupee Accounts (NRE) and Ordinary Rupee Accounts (NRO) are permitted to be maintained by NRIs. Funds in NRE Account are repatriable.

NRO A/C.: A NRO bank account is an ordinary saving bank account opened for NRIs. This is why it is known as Non-Resident Ordinary account. The funds, standing to the credit of this account, cannot be repatriated outside India in foreign exchange, without prior permission of RBI. Interest, earned on these accounts, is, however, eligible for repatriation outside India, net of Indian taxes. The remittance of interest (net of taxes) will be permitted by the authorized dealer where the account is maintained, on an application in the prescribed form by the NRINRIs can open NRO account for transactions in rupees without any approval. NRO account can be maintained in the nature of current, savings, recurring or fixed deposit account. NRIs may also open this account jointly with residents. After the NRI returns to India permanently, this account can be again designated as a resident account.

NRE A/C.: A NRE bank account is an external saving bank account opened for Non resident Indians. NRE account may be opened without any approval if the funds for this account are transferred in freely convertible foreign currency. The funds, standing to the credit of this account, as well as interest earned thereon, are repatriable outside India in free foreign exchange, without permission of the RBI. The interest income is not subject to Indian Income-tax. Credits to the accounts should be in the form of remittance in foreign exchange from outside India, as well as other funds, which are eligible to be remitted outside India, in free foreign exchange. Funds emanating from local sources are not eligible to be credited to these accounts, unless these funds are otherwise remittable outside India, in terms of the existing Exchange Control Regulations. NRIs may jointly open this account with another NRI. This account can be maintained in the form of saving or current or recurring or fixed deposit account.

For the same NRO accounts are opened. The monies lying in resident saving account can be transferred to NRO account.
Yes. Money can be freely transferred from NRE account to NRO account.
No. Money cannot be transferred from NRO account to NRE account. Even if money is transferred by error from NRE account to NRO account, it cannot be transferred back to NRE account.
No permission is required from RBI to open a Demat account. However, the designated authorized dealer ensures that securities have been received or delivered as per contract notes against payments/receipts made in the bank account.
No. Securities received against investments under ‘Foreign Direct Investment scheme (FDI)’, ‘Portfolio Investment scheme (PIS)’ and ‘Scheme for Investment’ on non – repatriation basis need to be credited into separate Demat accounts. Investment under PIS could be on repatriation (from NRE account) or on non – repatriation basis (from NRO account). Investment under FDI scheme is on repatriation basis.
Yes. All NRIs are eligible to trade in Derivatives through their NON PIS NRO account, subject to norms prescribed under FEMA and regulations of NSE, BSE and other regulatory bodies from time to time.
Yes. A power of attorney holder can manage portfolio on behalf of NRIs. However, he cannot affect remittance outside India. With internet trading, life of NRIs has become easy for portfolio investments.
Yes. NRIs can borrow against shares or other securities. However, the loan should be utilized for meeting the borrower’s personal requirements or for his own business purposes
No. All transactions of sales and purchase must be delivery based. Speculative transactions are not allowed. However, NRIs are allowed to enter into forward contracts to hedge their investment made in India.
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