The Indian equity market is viewed as a window to prosperity by resident Indians and Non-Resident Indians (NRI). So, for NRIs, the first step towards investing in stocks should begin with the opening of the NRI demat account. The NRI demat account is essential for NRIs looking forward to invest in bonds, shares, and Initial Public Offers (IPOs). The demat account is maintained to hold shares or securities in an electronic form. An NRI plans to invest in the Indian stock.
Termination Period of the existing Demat Account
If you are thinking to invest in the Indian equity market with the same demat account you had when you were a citizen of the country, drop the idea. An NRI will have to close his existing demat account; the one opened before acquiring NRI status. Your demat account, which holds shares that you purchased when you were a resident, would need to be transferred to an NRO (Non-Resident Ordinary) demat account.
The Reserve Bank of India imposes the restriction on NRIs when it comes to financing in the securities market. As per the RBI rule, you cannot buy or trade equities from the secondary marketplace in your present demat account if you are an NRI. Moreover, NRIs cannot invest beyond 5% in the paid-up funds of an Indian company. This is the purpose why an NRI has to close the existing and open a new demat account after acquiring NRI status. An NRI can buy stock raised through Initial Public Offers (IPOs) on the repatriable basis, using funds in the Non-Resident External (NRE) account.
Open PINS account for shares
- Buying shares from the secondary market require NRIs to open a Portfolio Investment Scheme (PINS) account with a bank.
- As per RBI norms, it is essential to maintain two separate accounts for repatriable and non-repatriable shares.
- Under Portfolio Investment Scheme, you can buy stocks using funds from your NRE bank account, and the sale profits will be credited to NRE account for repatriation. However, if you want to purchase shares on a non-repatriable basis, then the profits will be credited to your NRO account.
- An NRI can open a Portfolio Investment Scheme (PINS) account with one bank only. Additionally, you are eligible for holding only one account for repatriable shares and one for non-repatriable shares.
- Once you retrieve the permanent Indian resident title, you need to close your PINS account.
Documents required for PINS account
Approach a bank with the following documents to open a PINS account. Nevertheless, the list may vary slightly from bank to bank. If at the period of opening the NRI demat account you are overseas, photocopies of all documents must be attested via the Indian embassy. However, if you are in India, carry the originals, the bank staff will attest the photocopies. The documents are:
- Copy of PAN card
- Address proof in India
- Latest photographs
- Copy of Visa and Passport
- Proof of address abroad
- FEM Declaration
- Facts about NRI demat account
- Invalidated cheque leaf of NRE/NRO bank account.
NRIs can invest in stocks as well as in securities of Indian firms, government securities, etc. The NRI demat account cannot be opened or operated by an Indian Power of Attorney holder in the absence of the NRI. The person also cannot perform any payment out of India on behalf of the NRI. To create excellent wealth from the Indian equity market, you need to be relentlessly concentrated on even the tiniest details of the NRI demat account.