NRI Desk

A) DOCUMENTS REQUIRED FOR OPENING TRADING ACCOUNT FOR NRI/NRE/NRO

1. PAN Card – It Should be signed by client and attested by any one of given- consulate general/notary public/any court/Magistrate/Judge/local banker in the country where the Non resident resides.

2. Address Proof- Indian & Abroad.

List of address proofs:

a) Passport                                  e) Rent Agreement

b) Driving License                         f) Telephone/Electricity Bill

c) Ration Card                             g) Flat Maintenance

d) Election/Voting card

3. Proof of Demat A/c with NRI status mentioned on it.

4. Saving Bank A/c proof of NRI/NRE/NRO status printed on it required along with cancelled cheque.

5. In case of NRE/ NRI/ a/c PIS- Repatriation letter of bank required.

In case of NRO a/c PIS- Non Repatriation letter of bank required.

6. Full Copy of Passport along with date stamp for the period during which he/she was in India.

7. Financial details proof (Income tax return/six month bank statement/ audited accounts/Net worth certificate by a qualified chartered accountant).

8. Full copy of VISA, if any.

Notes:

  • If the applicant has submitted PIO card (Person of Indian Origin) for trading a/c opening  then in that case we can treat the a/c as NRI a/c or Individual a/c(as per documents given).

B)  FAQs  FOR NRI – TRADING ACCOUNT

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 regulations]

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

1. Dated Government securities (other than bearer securities) or

treasury bills.

2. Units of domestic mutual funds.

3. Bonds issued by a public sector undertaking (PSU) in India.

4. 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 repatriation basis.

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

branch.

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

a) he at any time, held an Indian passport; or

b) 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

c) 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.

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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 Non-

Resident Indians directly or indirectly but irrevocably.

Q12 Can Overseas Corporate Body (OCBs) also invest in shares in India?

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 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

PAN Card

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.

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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 Local banker.

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 &

NRO.

Q17 What are the additional requirement with respect to contract notes?

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 India.

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

delivery only.

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Q19 Is there any ceiling on the Investments under the Portfolio

Investment Scheme?

Ans :-  NRIs are allowed to invest in shares of listed Indian companies in

recognized Stock Exchanges under the PIS.

a. 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 Indian

companies.

b. 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.

c. 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

stock exchange?

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

private arrangement?

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 Reserve Bank.

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Q23 Can an NRI purchase securities by subscribing to public issue?

What are the permissions/approvals required? How can those shares

be sold?

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 Scheme.

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

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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 Derivative

Contracts?

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 underlying Index.

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:

1% of the free float market capitalization (in terms of number of shares)

OR

5% of the open interest in all derivative contracts in the same underlying

stock (in terms of number of shares)

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

http://www.rbi.org.in/scripts/BS_FiiUSer.aspx

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 Non-

Resident 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.

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References

RBI Master Circular dated RBI/2010-11/13 dated July 01, 2010.

FAQ hosted on RBI website www.rbi.org.in

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

Disclaimer

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 RBI.