How can NRIs invest in Indian Stock Market through Portfolio Investment Scheme (PIS)?

NRIs can acquire shares of Indian companies through the stock exchanges in India. PIS account is basically required by regulator to monitor investment limit by NRI’s in stock market.

Mar 15, 2018 05:03 IST India Infoline News Service

Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) are allowed to invest in the secondary capital markets in India through the Portfolio Investment Scheme (PIS). Under this scheme, NRIs can acquire shares of Indian companies through the stock exchanges in India. PIS account is basically required by regulator to monitor investment limit by NRI’s in stock market.
 
As per the revised guidelines from RBI, PIS is not required for NRO (Non-Resident Ordinary) account and investments under this will be deemed to be domestic (at par with the investment made by residents).
 
Quick steps to get you started with trading in India
  • Open NRO , NRE Saving and PIS NRE Bank account with Axis Bank / HDFC Bank / Yes Bank / IndusInd Bank
  • Submit your SEBI registered broker name to PIS designated bank on account opening form
  • Ask for PIS permission letter issued by PIS designated bank for NRE investment and share it with broker
  • Open Demat and trading account with SEBI registered broker for investing
A walk through of trading and settlement process
Banks will process the trade settlement transaction as per First in First out (FIFO) concept. Short term capital gain will also be debited as per FIFO methodology
  • Park your amount which you desire to invest PIS bank account
  • PIS designated bank will share your NRE PIS account balance
  • Broker will provide trading limit based on account balance shared by bank
  • Trade executed as per order received
  • Broker will submit contract note to bank for RBI reporting on T+1
  • Bank will settle the trade transaction as per bill to bill settlement
  • Separate transaction for purchase and sale will be settled
  1. Purchase Transaction: T+1
  2. Sale Transaction: T+2
  3. Debit of short term capital gain for sale transaction if any: T+2
  4. Debit of PIS reporting changes: T+1 for purchase and T+2 for sale
  5. Sale transaction for Rights/IPO/FPO/Bonus shares will be settled in saving bank account instead of PIS bank account
  • Intimation for rejection of contract note: T+1 
Purchase/sale transaction payments (PAYIN and PAYOUT) – Not processed by PIS designated bank
The payments for purchase and sale transaction will be rejected in the following cases by the bank
For purchase transaction:
  • Broker details are not available in bank records
  • Insufficient balance in PIS bank account but balance is available in linked saving account
PIS designated banks offer a facility to transfer fund from linked saving account to PIS account, however the process may vary from bank to bank.

For sale transaction:
  • Purchase details are not updated in bank records in below scenario
  1. Primary market purchase: IPO/FPO/Rights
  2. Off-Market Transfer
  3. NOC and Holding statement not submitted by erstwhile PIS service provider
  4. Bonus shares are not updated in bank records
  5. Share acquired under resident status are not updated in bank records with NRO account
Key things to take care of while investing in India
  • Always make delivery based transaction. No Intraday and BTST transaction
  • Never trade in Banned and Caution scrip
  • NRIs can purchase up to a maximum of five percent of the paid up capital of a company
  • Avoid investment in Prohibited sectors
  • Always reconcile your holding available in demat account with bank record
Please refer the below link to understand what are prohibited sectors, banned and caution scrip: https://www.rbi.org.in/scripts/BS_FiiUSer.aspx
 
Bank charges applicable for PIS account
PIS Issuance Fee: Fees charged by banks for issuing PIS permission on behalf of RBI to NRI clients. It is only applicable for NRE investment on NRE PIS Account
PIS AMC: Annual maintenance charges levied by bank for providing PIS services
PIS reporting charges: Charges levied by bank for doing settlement in bank account and reporting all trade to regulator
 
 
Comparison Chart

Charges

HDFC Bank

Axis Bank

Yes Bank

IndusInd Bank

PIS Permission Letter

1,000

1,000

0

0

PIS AMC

1,000

1,500

500

500

PIS Reporting charges

Transaction value up to Rs50,000

100

150

100

50 per scrip

Transaction value between Rs50,000 to Rs3,00,000

250

150

100

50 per scrip

Transaction value above Rs3,00,000

500

150

100

50 per scrip

 
 
Documents required for account opening
  • Passport Copy and Visa copy
  • PAN card copy
  • PIO/OCI Card in case of foreign passport
  • Foreign Address proof –Valid address proof i.e. Driving License/ Passport/Utility Bills/Bank Statement (not more than 2 months)/Leave & License agreement/ Sale Deed
  • Immigration stamp*
  • Indian address proof if required as communication address
  • Two passport size photographs
  • PIS permission letter
  • Cancelled bank account cheque
  • Account opening form
 All documents should be self-attested by client and verified with original by Relationship manager.

* If NRI is not present in India. Considering the infeasibility of carrying out ‘In-person’ verification of the non-resident clients for non-face to face customer, attestation of KYC documents by Notary Public, Court, Magistrate, Judge, Local Banker, Indian Embassy/ Consulate General in the country where the client resides may be permitted.

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