1.
Who is Non-Resident Indian (NRI)?
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]
2.
Can NRI Invests in shares in India through
a stock exchange?
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.
3.
Can NRI/PIO Invest in other Securities?
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.
4.
Are NRIs allowed to invest in Exchange
Traded Funds (ETFs)?
NRIs are allowed to Invest in Exchange Traded Funds (ETFs). NRIs can
invest in ETFs both on repatriation as well as non repatriation basis.
5.
How can NRIs invest in shares in India?
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.
6.
What is a designated bank branch?
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.
7.
What is a portfolio Investment Scheme
(PIS)?
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.
8.
Who is a person of Indian Origin?
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
1.
he at any time, held an Indian passport; or
2.
he or either of his parents for any of his grandparents was a
citizen of India by virtue of the constitution of India or Citizenship Act,
1955 (57 of 1995); or
3.
the person is a spouse of an Indian citizen or a person referred
to in clause (a) or (b).
9.
Who is
an overseas citizen of India (OCI)?
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 any time 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.
10.
Can PIO
(Person of Indian Origin) as well as OCI (Overseas Citizen of India) also invest in shares in India?
Yes, PIOs and OCIs do have 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.
11.
What is an Overseas Corporate Body
(OCB)?
‘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.
12.
Can Overseas
Corporate Body (OCB) also
invest in shares in India?
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.
13.
What
are the documents required to be collected from investor to open a NRI/PIO/OCI trading account?
List of
documents to be taken while registering NRI/PIO/OCI Clients as
may be applicable
1. Document
ensuring status of entity
1)
In case of Indian passport - Valid passport, Place of birth as
India, Valid Visa – Work/Student/employment/resident permit etc.
2)
In case of foreign passport : Valid passport and any of the
following
a.
Place of Birth as India in foreign passport
b.
Copy of PIO / OCI Card as applicable in case of PIO/OCI
2. PIS
Permission Letter from the respective designated bank
3. PAN
Card
4. 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.
5. Photograph
of Investor.
6. Proof
of respective bank accounts & depository accounts.
14.
What
are other client registration formalities to be taken care while registering NRI/PIO/OCI Clients?
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.
15.
Is it
mandatory for a client to provide local(Indian) address?
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.
16.
Can two
separate trading accounts namely (NRE & NRO) can be opened by NRI? Yes, clients can have two separate
trading accounts based on NRE & NRO.
17.
What
are the additional requirement with respect to contract notes?
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.
18.
What
precautions trading members need to take while dealing with NRI clients?
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.
19.
Is
there any ceiling on the investments under the portfolio investment scheme?
NRIs
are allowed to invest in shares of listed Indian companies in recognized
Stock Exchanges under the PIS.
20.
How
payments could be made by NRIs for shares purchased on stock exchange? 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.
21.
How
NRIs/PIO can remit sale proceeds?
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.
22.
Can an
NRI transfer shares purchased under PIS to other under private arrangement?
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.
23.
Can an
NRI purchase securities by subscribing to public issue? What are the permissions/approval required? How can those
shares be sold?
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.
24.
Can NRI
do Intra-day transactions in cash segment?
No, NRI Investor has to take delivery of shares
purchased and give delivery of shares sold. Short Selling is not
permitted.
25.
Can NRI
trade in futures & options segment of the Exchange?
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.
26.
Can NRI
trade in currency derivative segment of the Exchange?
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.
27.
Can
trading account be opened for person’s resident outside India who had been allotted shares under ESOP scheme?
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.
28.
Can
rights/bonus shares be issued to NRI?
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.
29.
What
needs to be done by NRIs for trading in futures & options segment of the exchange?
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.
30.
What
are the limits applicable to NRI in exchange trade derivative contracts?
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).
31.
How
Investments positions of NRIs are monitored?
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.
32.
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-residents?
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.
33.
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?
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.
34.
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?
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.
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
