NRI Trading Requirements (Accounts for trading in India)

Published on Monday, June 8, 2020 by Chittorgarh.com Team

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NRI Trading Requirements (Accounts for trading in India)

Contents:

  1. NRI Trading in India - Requirements
    1. NRI Bank Account
    2. NRI Demat Account
    3. NRI Trading Account
  2. Custodial Participant Code (for NRI F&O Trading)
  3. Documents required for account openings
  4. NRI Discount Stock Brokers in India
  5. NRI Full-service Stock Brokers in India
  6. FAQs

NRI Trading Requirements

An NRI wishing to invest/trade in Indian capital markets needs 3 accounts to start trading in India;

  1. NRI Saving Bank Account (NRO Non-PIS/NRE PIS)
  2. NRI Trading Account (NRE PIS/NRO Non-PIS)
  3. NRI Demat Account

Note:

  • For trading in derivative markets (Equity F&O), NRIs would require custodial participant code (CP code) as an additional requirement.
  • For trading in currency derivatives, NRIs would require an account with an authorized Dealer Category 1 Bank.

NRI Trading Requirements

Investment Option Trading on repatriation basis Trading on Non-repatriation basis

Equity

o NRE PIS Bank Account

o NRE PIS Trading Account

o NRE PIS Demat Account

o NRO Non-PIS Bank Account

o NRO Non-PIS Trading Account

o NRO Non-PIS Demat Account

{Easy and Convenient Option}

Mutual Funds/IPO

o NRE Non-PIS Bank Account

o NRE Non-PIS Trading Account

o NRE Non-PIS Demat Account

o NRO Non-PIS Bank Account

o NRO Non-PIS Trading Account

o NRO Non-PIS Demat Account

Derivatives

-

o NRO Non-PIS Bank Account

o NRO Non-PIS Trading Account

o NRO Non-PIS Demat Account (required now due to physical settlement of stocks in F&O if applicable)

o Custodial Participant Code

1. NRI Bank Account

An NRI has to open NRI bank account as a first step towards trading. There are 2 types of bank accounts viz. NRE [Non- resident External] and NRO [Non- resident Ordinary]

NRE Bank account is to transfer income earned abroad to India. It is a rupee dominated account meaning the money can be deposited in any foreign currency will get converted to the Indian rupee at the time of deposit. It is a repatriable account and interest earned on it is tax-exempt since these are earnings from abroad.

NRO bank account is a non-repatriable account to manage the income earned in India viz. rent, dividend, etc. The principal amount is repatriable subject to restrictions of USD 1 million per financial year. The interest earned on this account is fully repatriable.

The bank accounts are further classified as PIS and Non-PIS. PIS is the Portfolio Investment Scheme of RBI to facilitate trading by NRIs and PIOs in the Indian stock market.

Initially, PIS was mandatory permission required by NRIs to enter into Indian stock markets where each trade executed by NRI was reported to RBI. This reporting was required to monitor the NRI stock limits and calculation of tax obligations. The sale proceeds were credited to PIS linked bank account post deduction of tax at source as applicable. However, the rules have now been relaxed for NRO mode of transaction, and NRI trading without PIS is possible. NRIs can trade like resident Indians without any requirement of PIS on a non-repatriation basis. The PIS account is required only if an investor wants to trade on a repatriation basis and has an NRE bank account.

How to open an NRI bank account?

To open an NRI bank, an individual can opt for any of the below options:

  1. In case NRI is in India, he can visit the bank branch and complete all the formalities of account opening by submitting the duly form and required documents.
  2. NRI can apply to open the account online by visiting the bank website and downloading the forms and submitting the duly filled form and required attested documents online. Nowadays almost all banks provide online account opening facilities.
  • NRI can visit the bank branch in a foreign country if available and provide all the required details and documents.

Once the bank has verified all the documents and is satisfied with the KYC, NRE or NRO or both accounts would be opened by the bank as chosen.

How to open a PIS account?

In case an NRI wishes to trade on a repatriation basis, he would have to open an NRE account and apply for a PIS account. Ideally, with relaxation in norms for trading with NRO account which is a way simpler, efficient, and convenient process for NRI investment, an individual may not want to opt this long route, but considering the option is open, given below is the process for PIS account opening.

  1. An NRI wishing to apply for PIS accounts needs to request the bank where the NRE account has been opened for PIS form.
  2. The duly filled up PIS form with required documents should be submitted to the bank who would further send it to RBI for approval.
  3. Once the RBI approves, the said NRE bank account gets designated as the NRE PIS bank account.

2. NRI Demat Account

A Demat account is another must-have requirement to invest in Indian capital markets for holding the securities in electronic format. A Demat account can be opened by approaching a stockbroker. In case the stockbroker does not offer depository services, the Demat account can be opened with a depository participant.

Similar to bank a/c, an NRI has to select the type of Demat account one would like to open viz. NRE (repatriable) or NRO (non-repatriable). Based on the selection made, the stockbroker or depository participant will open the Demat account as NRE or NRO on receipt of duly filled up account opening forms and required documents.


3. NRI Trading Account

Along with the bank account and Demat account, an NRI needs a trading account to be fully ready to start trading stock on Indian exchanges. A trading account acts as an interface between the bank and the Demat account which is used to place orders with brokers for buying and selling the securities.

The trading account can also be opened as NRE or NRO based on the repatriation basis. In case, one wants to trade to withdraw the funds externally, an NRE Trading account needs to be opened linked to the NRE PIS bank account and to trade on non-repatriation basis NRO trading is to be opened linked to NRO bank account. With the recent change in rules, an NRI does not need PIS to trade in NRO mode.

A trading account can be opened by approaching a stockbroker.

Thus, an NRI can open all the above accounts by approaching the bank, stockbroker/depository participant. To make this process easy and convenient, many financial institutions offer various facilities to NRI as per below:

  • 3-in-1 account: This facility is mostly offered by big banks where a combination of a bank, trading, and Demat account can be opened. Some banks also call it a 4-in-1 account including 2 bank accounts (PIS and Non-PIS).
  • 2-in-1 accounts: This facility is provided by most brokers where they offer to open the trading and Demat account and for the bank account, they refer the banks with whom they have tied up.

4. Custodial Account (for NRI F&O Trading)

To trade in the derivatives market, an NRI would additionally need a custodial participant code. The custodial participant code (CP code) is a unique code for clearing and settling the trade. The CP code can be obtained by approaching a stockbroker/custodian who is a clearing member for F&O (Futures and options - derivatives) trades. The clearing member applies to the clearing corporation for the CP code on behalf of the investor by submitting duly filled up forms and required documents. Once the clearing corporation is satisfied and has verified all the documentations it allocates a unique CP code to the NRI. NRI can now start trading in the derivatives segment by maintaining adequate margins with the clearing member.


Documents required for account openings

Below are the documents required for opening the above account. There may be slight variation in requirements from institution to institution.

  1. Proof of Identity -Passport, PAN.
  2. Proof of NRI status - Copy of visa or work permit or overseas resident card.
  3. Address Proof- Relevant pages of a passport
  4. Photographs
  5. Cancelled cheque/paid cheque or cheque drawn on an overseas bank account.
  6. PIS approval from RBI (required only for NRE Demat and trading account)
  7. FEMA declaration letter (required for Demat account)


 

ProStocks Non-PIS NRO Trading

 

Frequently Asked Questions

  1. 1. What are the requirements for NRI trading in India?

    NRI Trading Requirements

    An NRI requires an NRI Bank Account, NRI Trading Account, NRI Demat Account to start trading in India markets. Initially, PIS permission was a mandatory requirement to trade in equity stocks. However, now PIS is required only if an NRI wants to trade on a repatriation basis. Based on whether an NRI wants to trade on the repatriation or non-repatriation basis below are the specific requirements.

    Investment Option

    Trading on repatriation basis

    Trading on non-repatriation basis

    Equity

    · NRE PIS Account

    · NRE Bank Account

    · NRE Demat Account

    · NRO Non-PIS Bank account

    · NRO Non-PIS Trading account

    · NRO Non-PIS Demat account

    F&O

    Not Allowed

    · NRO Non-PIS Bank account

    · NRO Non-PIS Trading account

    · NRO Non-PIS Demat account

    · Custodial Participant Code (CP Code)

     

  2. 2. Can an NRI trade without PIS?

    Till recently PIS was mandatory for NRI to invest in Indian equity stocks. However, the rules have now been changed and NRI trading without PIS is possible. The relaxation is applicable for NRO mode of transactions I.e. an NRI can trade without repatriation benefits using NRO account just like resident Indians.

     

  3. 3. Is PIS mandatory for NRI trading?

    Initially, NRIs were allowed to enter Indian stock markets through the PIS route only for investing in equity stocks on repatriation or non-repatriation basis. However, with new rules PIS is no longer mandatory for trading on non-repatriation benefits An NRI can open an NRO bank account, NRO trading account, and NRO Demat account and start trading in Indian equity. The PIS approval is required only if an NRI wants to invest in equity stocks on a repatriation basis.

     

  4. 4. Can an NRI use NRE account for trading in derivatives?

    As per RBI regulations, trading in derivatives is permitted on a non-repatriation basis only out of rupee funds earned in India. Hence, an NRI can trade in derivatives using the NRO account only and not the NRE account.

     

  5. 5. Is Demat account mandatory for trading in derivatives?

    Initially, the Demat account was optional for trading in the derivatives segment. However, with the introduction of the mandatory physical settlement of stock in F&O, the Demat account is a must to receive or deliver stock that would arise out of settlement obligation in the F&O segment on expiry.

     

  6. 6. Can I convert the Resident Demat Account to NRI Demat Account?

    Yes. A resident Demat account can be converted to an NRI Demat Account. Technically the old demat account is closed and a new demat account is opened with an NRI Non-Repatriable status. If you are an NRI holding stocks in your resident demat account, following are the options available to you:

    • Open a new Demat Account (NRO), transfer your holdings to it and close the old demat account. The process is simple and taken care of by the stock broker while opening the NRO demat account. Note that your broker may ask you for proof of purchase (i.e. old contract note) to make sure that these shares were bought when your status was resident Indian.
    • Transfer holdings to your family member's resident demat account.
    • You can also keep the holdings in the existing demat account (resident) on a non-repatriable basis.

    Document required for converting resident to NRI Demat Account:

    • Account Modification Form - To update the Bank details and foreign address.
    • Copy of FEMA declaration
    • FATCA Declaration Form
    • Trading Account Closure Form for closing the resident trading account.
    • New NRI Trading Account Application Form.
    • Notarized copies of self- attested PAN card, Indian Address Proof, Foreign address proof.
    • Copy of passport (Notarized)
    • Copy of PIO/OCI card if applicable.
    • Proof of Bank account (a cancelled cheque of NRO bank account).
    • Copy of PIS account / NRO-Investment account letter to map to the trading account.

    Many NRI customers ask questions like:

    I had a resident demat/trading account with a broker. Now I have become NRI. Can I convert the same account to NRI Demat/Trading account?

    Note

    • A resident demat account can be converted into an NRO demat account as long as you have an NRO Saving Bank Account.
    • A resident trading account cannot be converted into an NRI trading account. An NRI customer has to close the resident trading account and open a new NRI trading account.

     

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