Non-resident Indians who wish to invest in Indian stocks and bonds and be a part of the India growth story, can do so under the RBI’s Portfolio Investment Scheme (PIS).
The buying and selling transactions can be conducted on recognised stock exchanges and routed through NRI savings accounts with designated bank branches across the globe.
The investments can be made on a repatriation or non-repatriation basis. For investments under repatriation, a separate NRE bank PIS account is opened by remittance from the overseas account. In case the investments are made on non-repatriation basis, a separate NRO bank PIS account is opened by remittances from overseas accounts or local sources.
Knowledge of what NRIs can or cannot do with their PIS is important, especially as more and more Indian companies are taking centre-stage and reputed blue chip stocks become choice for global funds.
- NRIs can invest in the shares or bonds of such companies, but are not allowed to do day trading. They have to compulsorily take delivery of shares and no borrowing or short selling is permitted.
- NRIs can however, invest in futures and options that are traded on recognised stock exchanges. Global index funds and other managers perform such trades on a non-repatriation basis only, subject to regulatory limits.
- There is a limit to the amount of investments NRIs can make in a stock. These limits are fixed by the RBI, and monitored on a daily basis. For investments under repatriation basis, upto 5% of the paid-up capital of a company for a single NRI is allowed. Aggregate investments by NRIs in a particular stock should not exceed 10% of paid up capital of the company. However, this ceiling can go up to 24% if a special resolution is passed to such effect.
- When a resident becomes an NRI, he/she can continue to hold the securities on a non-repatriation basis.
- Conversely, when an NRI becomes a resident Indian, the status of holding is required to be changed by informing the designated authorised branch and a new resident Demat account is to be opened while the NRI Demat account is subsequently closed.
- NRIs can also invest in IPOs or initial public offerings of stocks in India without seeking additional permission.
Other factors that need to be taken into account include the fees and charges levied by banks on PIS accounts like PIS AMC fee, PIS issuance fee, PIS reporting charges etc.
Overall, PIS Schemes are beneficial for NRIs to be able to invest in their favourite company stocks and be a part of the India story in the emerging market basket.