NRIs & OCIs, though keen to invest in Indian equity markets, are unsure on eligibility criteria for investment, process and modes of investments in equity markets. Investments in equity markets can be done through both repatriable i.e. through NRE (Non-resident External funds) earned overseas and Non-Repatriable i.e. through NRO (Non Resident Ordinary – Non-Repatribale) funds accumulated prior to attaining NRI Status thus giving flexibility to operate from both or either of these accounts.
Investments for NRI/OCIs in equities have been simplified under regulatory framework of Portfolio investment scheme (PIS) for secondary market investments through regulated entities likes banks and reputed Broking houses.
For initiating investments in secondary equity markets NRI/OCIs need to follow few standard steps which mandatory as per regulatory guidelines.
Having an NRE (non-resident external) or NRO (non-resident ordinary) bank account is mandatory for an NRI looking forward to invest in India. NRE and NRO bank accounts are basically Rupee accounts for NRIs where the latter can park their foreign funds post converting in Indian Rupees.
These accounts are similar in terms of operations but offer different repatriation benefits on the funds held in these account. Thus, based on the requirements, you can open an NRE or an NRO accounts with any bank by submitting all required KYC (Know your customer) documents.
A PAN card can be obtained from the Income Tax department where all that one needs to do is file an application and submit it with the required documents and proofs. Today this can be easily done online. PAN is required not only to make investments but also for tax-related matters.
Under the PIS (Portfolio Investment Scheme), the RBI (Reserve Bank of India) allows NRIs to invest in the shares of Indian companies. For this, a PIS permission letter from a designated bank is required, which allows you to invest in stocks. This procedure aims to ensure regulatory monitoring of the concerned NRI’s investments.
Banks will open separate NRE PIS account for Repatribale investment and Designated NRO settlement account for non-repatriable investment.
NRI/OCIs will have to open demat and trading accounts with SEBI registered brokers to invest in the Indian markets. To open these accounts, you need to submit KYC documents along with service charges.
NRI/OCIs for their their transactional convenience can designate Mandate or Power of Attorney (POA) Holder, which can be a resident local person to take care of his/her Bank and Demat accounts. This person in question will also be required to sign the mandate/(POA). A mandate/POA Holder can act according to and within defined execution authority provided through mandate or Power of Attorney on behalf of NRI/OCIs.
Once the demat and trading accounts have been opened, NRI/OCIs will be able to invest in Indian capital markets through direct equities, buy selected bonds and convertible debentures, as well as invest in ETFs (exchange-traded funds) and mutual fund portfolios.
NRI/OCIs can seek stock and portfolio recommendations through existing reputed brokers which are backed by strong research teams for building a risk mitigated balanced capital market portfolio.
For investment in equities, considering the varied time zones for NRIs based in various geographies, they can utilise the facility of Aftermarket Orders (AMO) to place trades aftermarket hours, which would be executed next working day facilitating ample time to make analysis for his investments.