NRI (NRIS) has shown increasing interest in Indian financial markets. However, investment in India comes as NRI comes with the legal requirements prepared by two leading officials - Reserve Bank of India “RBI” & Securities and Exchange Board of India (SEBI). This article emphasizes the most important guidelines set by both institutions to help NRIS -compatible and invest confident.

1. RBI role in NRI investment

Reserve Bank of India explains how NRIS can take money in India and outside. Here are the most important RBI guidelines:

PIS Account Requirement

NRIS must open Portfolio Investment Scheme (PIS) account through an authorized bank, which trades in Indian stock markets on a repatriable basis. The scheme allows investment in shares and convertible bonds through a specified bank account.

Repatriation rules

• Investments through NRE accounts are repayment (i.e. money can be withdrawn abroad).

• Investments through NRA accounts are non-flowering beyond a certain area.

Repatriation Rules

• Investments via NRE accounts are repatriable (i.e., funds can be taken back abroad).
• Investments via NRO accounts are non-repatriable beyond the certain limit.

FDI vs Portfolio Investment

Can invest under NRI:

• FDI route: For businesses/companies

• PIS Route: Buy stock listed on Indian stock exchanges

Limits on Holdings

RBI determines a limit on how much NRIS can invest in the same company & usually up to 10% of the paid capital, extended up to 24% with shareholder approval.

2. Role of SEBI in NRI Investments

The Securities and Exchange Board of India (SEBI) regulates stock trading and protects investor interests.

Registered Intermediaries

NRI should only act through SEBI-regulated brokers and intermediaries

Demat and trade accounts

• NRIS must open separate Demat and Trade Accounts with Sebi Nri Circular Depository participants.
• A single account cannot be used for both returning and non-preventable investments.

Product Restriction

NRI is not allowed:

• Do Intraday trading
• Currency or commodity markets (as long as it is especially allowed)
• Invest in stock exchange listing of small cap without permission

Conclusion

The Indian stock market is open and accessible to NRIs, but only through well-defined regulations set by RBI and SEBI. Understanding these rules helps NRIS to avoid penalties, ensure even transactions and informed investment decisions.

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