NRI Trading Requirements
If an NRI wishes to make investment or trade in the Indian Capital Market then he/she needs three accounts to start trading in India.
- NRI Saving Bank Account (NRO Non-PIS/ NRE PIS).
- NRI Trading Account (NRE PIS/ NRO Non-PIS).
- NRI Demat Account.
- To trade in the derivative market (Equity and F&O), the NRI require custodial participant code as an additional requirement.
- To trade in the currency derivatives, then the NRIs needs to have an account with an authorized dealer category 1 bank.
|Investment Option||Trading on repatriation basis||Trading on Non-repatriation basis|
The documents that are necessary to open a NRI Account listed below. The document requirement may differ from broker firm to broker firm.
- An identification Proof i.e. Passport, PAN.
- A NRI status Proof i.e. copy of VISA or work permit or overseas resident card.
- An Address Proof- Relevant pages of a passport.
- Passport Size photographs.
- A cancelled cheque/paid cheque drawn on the overseas bank account.
- A PIS approval from RBI (for NRE Demat and Trading Account)
- FEMA Declaration letter (required for Demat Account)
An NRI needs to hold a NRI bank account to start trading in the Indian Stock Market. There are two types of bank account i.e. NRE (Non-Residential External) and NRO (Non-Residential Ordinary).
NRE Bank account is maintained so that the income earned abroad India can be transferred. In this account the money deposited in any foreign currency can be converted in the Indian rupee at the time of deposit. This is a repatriable account and the interest earned on it is tax-exempt as the earnings are from abroad.
NRO Bank account is a non-repatriable account that manages the income earned in India i.e. rent, dividend, etc. The principal amount is repatriable subject to the restrictions of USD 1 billion per financial year. The interest earned on this account is completely repatriable. The bank accounts are further classified as the PIS and Non-PIS account. PIS is the acronym of Portfolio Investment Service. This service is provided by RBI to avail trading service to NRIs and PIOs in the Indian Stock Market.How to open a NRI bank account?
An individual can choose an option from the below given points to open a NRI account:
- The NRI customers can visit the bank branch if he is in India and further he can complete all the formalities of account opening by submitting the duly form and required documents.
- The NRI customers can apply online by visiting the bank website and downloading the forms and submitting the duly signed form and required attested documents online.
- The NRI can also visit the bank branch in foreign country if available and continue the further account opening process from there.
In order to stat trading in Indian Stock Market, an NRI needs to hold a demat account along with their bank account and trading account. It is just another necessity to initiate trading in the Indian Stock Market. A demat account can be opened by approaching a stock broker.
This account is similar to a normal bank account but just the difference is that it holds shares in place of money. A NRI can select the stockbroker or depository participant to open a demat account as NRE or NRO on the receipt of duly filled up account opening forms and documents.NRI Trading Account
A NRI also require a trading account to be completely ready in order to start trading on Indian stock exchanges. A trading account acts as an interface between the bank and the demat account that is used to place orders with the broker for buying and selling securities.
It can be opened as NRE or NRO on the repatriation basis. In case, an individual is willing to trade and withdraw funds externally, an NRE trading account also need to be opened with NRE PIS bank account. In order to trade on the non-repatriation basis a NRO Trading account with the NRO bank account is to be opened. A trading account can be opened by choosing a broker.Custodial Account (For NRI F&O Trading)
In order to trade in the derivatives market, an NRI needs a custodial participant code. The CP code is a unique code for clearing and settling the trade. This code can be obtained by approaching the stock broker that is a clearing member for Future and Options derivatives trade. The NRI can start trading in the derivative segment by maintaining an adequate margin with the clearing member.