There is good news for all NRI’s wanting to invest in the Indian stock markets. RBI has now amended FEMA regulations which now allow NRI’s to invest in Equity markets on non-repatriation basis just like resident individuals. Here’s the link to the RBI circular.
During account opening send a trading and demat account form (choose residential status as NRI or Person of Indian origin) along with your NRO savings account cancelled cheque leaf as a proof and your attested international address proof. All brokerage charges would be as applicable to resident individuals (charged for NRI clients coming through the PIS route). You are also required to sign and send a copy of the FATCA declaration and FEMA declaration forms.
Equity - delivery and intraday trades will be allowed. Trading in F&O (equity, currency, commodity) will not be allowed. This also means that you can map any NRO bank account unlike being limited to just our partner banks for PIS (Axis Bank).
The below information is our effort to simplify what goes into opening a NRI trading and demat account for investing in the Indian Stock Exchanges through the PIS route on repatriation basis.
Non-resident External Account (NRE) is a bank account where both the principal and the interest earned can be repatriated. You can transfer dollars from your foreign bank account which gets converted to rupees when it hits your NRE account. Funds kept in the NRE account can be converted back into dollars and can be transferred back to your foreign account along with the interest earned. This ability of an asset to be moved from a foreign country to the investor’s home country is called repatriability.
Non-resident Ordinary Account (NRO) is a bank account where principal and interest only upto $1million per year can be repatriated.
You need to get a PIS (Portfolio Investment Scheme) permission letter from RBI (Reserve Bank of India) before you can open a trading or demat account with a brokerage in India.
The bank where you opened the NRE/NRO account will take care of this. Make sure to submit all the requisite documents.
You can now open a trading and demat account with a brokerage firm (like DP TradeKING). Along with all the other documents, you have to also give a copy of the PIS letter that the bank would have given you. Here is the application form to open a DP TradeKING Trading & Demat Account.
Note that you can open both NRE and NRO bank account simultaneously with a bank. In this case, you have to specify which one of these two you want to be mapped to your trading account. You can map only one of these accounts to your trading account. By mapping your NRE account, you can only trade in the Equity segment whereas through an NRO account, you could trade in both Equity & Derivative segment. If you wish to map both these accounts for the sake of Equity trading, you’ll have to obtain 2 client codes from your brokerage firm.
Yes you can trade in F&O segment of the exchange out of the rupee funds held in India on a non-repatriate basis. It is a little complex to get started as trading on F&O requires a NRI to get a Custodial Participant (CP) code. Once you have the CP code, all the funds for trading F&O will sit with the custodian, similar to how all your funds for trading stocks sit with your bank. A typical starting portfolio size for a custodial account is Rs 25lks.