If you are an NRI/PIO, you may want to invest in Indian companies’ shares. However, you cannot invest simply by opening a regular trading account like other resident Indians.
You are allowed to trade via PIS route only.
NRIs / PIOs can purchase shares or convertible debenture of an Indian Companies through stock exchanges, under the portfolio investment scheme (PIS) on repatriation and /or non repatriation basis.
NRIs / PIOs can also invest in other securities like:
- Dated Government securities (other than bearer securities) or treasury bills
- Units of domestic mutual funds.
- Bonds issued by a public sector undertaking (PSU) in India.
- Shares/Equity in Public Sector Enterprises being disinvested by the Govt. of India.
- In Exchange Traded Funds (ETFs). NRIs can invest in ETFs both on repatriation as well as non repatriation basis.
How can NRIs/PIOs invest in Shares/Stocks in India?
As per RBI Guidelines, NRIs/PIOs interested in investing in Indian Equity Markets need to open a PIS account with any Authorized Dealer (Bank) authorized by RBI to open PIS account for this purpose. A PIS account is opened with an NRE or NRO account to route the investments from these accounts to PIS accounts.
What is a Portfolio Investment Scheme ?
Portfolio Investment Scheme (PIS) is a scheme of RBI 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.
- NRIs can invest through designated ADs, on repatriation and non repatriation basis under PIS route up to 5 % of the paid- up capital / paid-up value of each series of debentures of listed Indian companies.
- The aggregate paid-up value of shares / convertible debentures purchased by all NRIs cannot exceed 10 % of the paid-up capital of the company / paid-up value of each series of debentures of the company.
- The aggregate ceiling of 10 % can be raised to 24 per cent, if the general body of the Indian company passes a special resolution to that effect.
How To Transfer Funds ?
- For investment of NRE Funds (repatriable funds) into NRE PIS account, you just need to do an intrabank fund transfer from NRE savings account to NRE PIS account.
- At the time of investing, the funds will be debited from the PIS account.
- Upon selling the sale proceeds will be credited to NRE PIS Account. You can then transfer funds back to NRE Savings account.
- Similarly for investment of Indian funds (not fully repatriable) into shares, you need to transfer NRO funds to NRO PIS account first.
- Once the funds are in NRO PIS, the same will be debited from NRO PIS Account and shares will be allocated.
- On sale of shares, the proceeds will come into NRO PIS account from where these can be transferred back to NRO savings account.
A few important points to be noted:
- NRIs cannot do Intra-day transactions in cash segment.
- NRIs can trade in futures & options segment of the Exchange.
- NRIs cannot trade in currency derivative segment of the Exchange.
- Rights/bonus shares can be issued to NRIs subject to adherence to sectoral cap as may be applicable.
Recommended Read: http://www.oracleinvestor.com/stocks/why-you-should-invest-in-shares/
>> If you are an NRI , you can contact your bank to open a PIS Account.
Hope this helps.