وَأَحَلَّاللَّهُالْبَيْعَوَحَرَّمَالرِّبَا   Allah has permitted trade and has forbidden interest    اللهتعالیٰنےتجارتکوحلالکیااورسودکوحرام   (Quran 2:275)
Open Demat Account

NRI Account

NRI Demat Account Opening Process

Today, opening a demat account in India is done in just a few clicks. Easy, convenient and effective, any budding investor can start their journey in the world of financial markets by opening a demat account. But, does this ease of opening a demat account also extend to NRIs? Since NRIs are recognised as non-residents, do they have to undergo a different procedure of opening a demat account? To demystify this topic, let us take a closer look at opening a demat account for NRIs below:

How is the term NRI defined ?

According to the Foreign Exchange Management Act of 1999, the term NRI is used to refer to an individual who is an Indian citizen or an Indian-origin citizen who lives in a foreign country for employment, business or other reasons. The term NRI is also used to refer to an Indian citizen who has lived in India for less than 182 days during the preceding financial year.

NRI Demat Account

Indian financial markets, particularly stock markets, hold immense value for investors from around the world, including NRIs. Fortunately for NRIs, the procedure of opening a demat is quite similar to that for resident Indians. It is also operated and charged similarly.

The only manner in which the account opening process for NRIs is different is that you have to declare your status (resident or NRI) and then choose the suitable subtype of the NRI demat account for your needs

Types of NRI Demat Account

  • NRE (Non-Resident External) Demat Account:
    The purpose of this type of demat account isfor NRIs to buy or sell securities on a repatriable basis. Keep in mind that with an NRE Demat account, you can only make investments in the stock market and have to go through the Portfolio Investment NRI Scheme, or PINS route. With an NRE demat account, both the principal amount and interest generated are repatriable..
  • NRO (Non-Resident Ordinary) Demat Account:
    This type of demat account is used to trade in shares, including futures and options, on a non-repatriable basis. When you open a Demat account under NRO, you do not have to go through the PINS route and can repatriate up to $1 million in a financial year. Moreover, the principal amount is repatriable while the interest generated is non-repatriable.

How to open an NRI Demat Account?
The procedure to open a Demat account as an NRI is quite simple and convenient:

  • As an NRI looking to open a Demat account in India, the first step you must take is to compile all the necessary documents for the process. Among these, the most essential is your PAN card, details of your NRI bank account, and a PIS permission letter issued by the Reserve Bank of India.
  • Ensure that all your documents are verified by the local Indian Embassy or by a competent authority approved as per the guidelines laid out by SEBI.
  • Visit the website of your preferred Depository Participant (DP). Make sure to look for the best services in the market. For instance, DPs such as IIFL offer traders the opportunity to open a free demat account online.
  • On the website of your preferred DP, search for and select the option to ‘open a demat and trading account’. A majority of DPs offer the two services as a single feature.
  • Fill out the account opening applications and upload scanned copies of all the required documents.
  • Upon submitting the required documents, your application will be processed by the DP

Conclusion

As evidenced, the Demat account opening process for NRIs is not too different from that for resident Indians. All that you must ensure is to select the correct subtype of account when filing the paperwork to open a Demat account with your preferred DP.

View FAQs

  • Under the Foreign Exchange Management Act, 1999 (FEMA), a person who is NOT a ‘person resident in India’, as defined under Section 2 (v) of the Act is considered as a ‘person resident outside India’.
  • The most important change in definition (since FERA 1973) is that the citizenship of a person no longer has a bearing in determination of residential status.

  • Person of Indian Origin’ (PIO) means a citizen of any country other than Bangladesh or Pakistan, if
    1. he at any time held Indian passport; or
    2. he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955; or
    3. the person is a spouse of an Indian citizen or a person referred to in sub-clause [a] or [b].
  • Investment by PIO in Indian Securities is treated the same as the investment by non-resident Indians and requires same approvals and enjoys the same exemptions.

  • Portfolio Investment Scheme (PIS) is a scheme of Reserve Bank of India under which Non Resident Indian (NRIs) can purchase/sell securities permitted by RBI from time to time 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.

  • HDFC Bank
  • Axis Bank
  • RBL Bank
  • Federal Bank
  • State Bank of Mauritius
  • YES bank
  • Kotak Bank

Two types of rupee accounts viz. Non Resident (external) Rupee Accounts (NRE) and Ordinary Rupee Accounts (NRO) are permitted to be maintained by NRIs. Funds in NRE Account are repatriable.

  • A NRO bank account is an ordinary saving bank account opened for NRIs. NRIs can open NRO account for transactions in rupees and can be maintained in the nature of current, savings, recurring or fixed deposit account.
  • A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) may remit an amount up to USD one million, per financial year, out of the balances held in his Non- Resident (Ordinary) Rupee (NRO) account for all bona fide purposes, subject to payment of applicable taxes in India, if any.

  • A NRE bank account is an external saving bank account opened for Non resident Indians. NRE account can be opened without any approval as the funds for this account are transferred in freely convertible foreign currency.
  • Credits to the accounts should be in the form of remittance in foreign exchange from outside India, as well as other funds, which are eligible to be remitted outside India, in free foreign exchange.
  • This account can be maintained in the form of saving or current or recurring or fixed deposit account.

Click here to view the documents required to open NRI trading account.

Under which segments NRI can invest in India through a stock Exchange?

  • NRIs can invest under the Portfolio Investment Scheme (buying through the secondary market) and through the Direct Subscription Route (Investments though IPOs). Under below segments customer can invest:
  • Equity – Only Cash
  • IPO
  • Mutual Fund
  • Exchange Traded Funds.

  • NRI’s not allowed to do Intraday transaction. They can only trade on delivery basis.
  • Short selling is not allowed.

Yes. Clients can have two separate trading accounts based on NRE & NRO.

No. NRI’s cannot trade in Currency derivatives segment.

Listed Indian companies are allowed to issue shares under the Employees Stock Option Scheme (ESOPs), to its employees or employees of its joint venture or wholly owned subsidiary abroad who are resident outside India, other than to the citizens of Pakistan. Trading account can be opened for person’s resident outside India only for the sole objective of selling of shares acquired under ESOP Scheme.

FEMA provisions allow Indian companies to issue Rights / Bonus shares to existing non-resident shareholders, subject to adherence to sectoral cap as may be applicable

As per section 6(5) of FEMA, NRI can continue to hold the securities which he/she had purchased as a resident Indian, even after he/she has become a non resident Indian, on a non-repatriable basis.

  • It is the responsibility of the NRI to inform the change of status to the designated authorized dealer branch, through which the investor had made the investments in Portfolio Investment Scheme and the DP with whom he/she has opened the demat account.
  • Subsequently, a new demat account in the resident status will have to be opened, securities should be transferred from the NRI demat account to resident account and then close the NRI demat account.

Yes, customer needs to open a new trading account.

List of caution/banned RBI scrip is available at https://www.fpi.nsdl.co.in/web/Reports/ForeignInvestmentLimitMonitoringListing.aspx / https://www.cdslindia.com/publications/FIMonitoring.aspx.