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NRI Trading Step by Step Guide

Published on Monday, November 11, 2019 by Chittorgarh.com Team

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NRI Trading Step by Step Guide

The Indian stock market offers a plethora of opportunities to trade and invest. NRIs are allowed to invest in stocks, Futures & Options (F&O), IPOs, and Mutual Funds, amongst other securities. However, they have to trade in a different regulatory framework and compliance process than resident investors.


NRI Trading Process

Once you have opened all the required accounts (NRI Bank, Trading and Demat Account), you are set for trading. The steps to trading in stocks depend on whether you're holding a 2-in-1 or a 3-in-1 account. We will explain to you both the steps:


1. NRI Trading Process (3-in-1 Account)

In an NRI 3-in-1 account, the NRI Bank Account (PIS enabled), Trading and Demat account are opened with the same broker (or bank) i.e. ICICI, HDFC, SBI. These accounts are well integrated to offer seamless transactions between them. Some brokers also call it the NRI 4-in-1 account as they open 2 bank accounts; PIS and Non-PIS enabled bank account.

Steps to Buy/Sell Stocks by NRI

  1. Choose an online trading software (mobile app, website or trading terminal)
  2. Log in to the trading software
  3. Go to the equity section and then place the order page. Here you need to enter or select the following information:
    • Select the exchange (BSE or NSE) you want to place orders in.
    • Stock Name- Mention the Stock Code in the field. If you do not know the Stock code, enter initial letters of the stock and click the 'Find Stock Code'.
    • Quantity - Enter the number of shares you want to buy.
    • Order Type - Market or Limit
    • Price - In case you select the limit order type.
    • Click Submit
  4. Your broker's system will check the availability of the funds in your PIS linked NRE account. If you have sufficient funds the buy order will be sent to the exchange. If you wish to modify the Order, you can do it in the 'Order Book'.
  5. Once the buyer/seller found, the order gets executed by the exchange and a confirmation is sent as an alert in the trading application.
  6. At the end of the day, a contract note is prepared by the broker and sent to you by email. The contract note provides the details of a trade with stock name, quantity, trade value, brokerage, and taxes, etc.
  7. In the case of a buy order, funds are withdrawn from the linked NRI account. The shares are deposited in your demat account on T+2 days where T is the day of trading.
  8. In the case of sell transaction, shares are withdrawn from your demat account. The funds are deposited in your linked NRI bank account on T+2 day.
  9. Bank reports all the transactions from NRI Bank Account (PIS enabled) to the RBI daily.

2. NRI Trading Process (2-in-1 Account)

The NRI 2-in-1 account is a combination of trading and demat accounts. A broker who does not have a banking license offer this account. NRIs have to open NRE/NRO bank accounts and get PIS permission before opening the trading account.

One key difference between trading with a 3-in-1 account and the 2-in-1 account is that in a 2-in-1 account, the broker has to request the fund from the bank (3rd party) after the trade is done. In the case of the 3-in-1 account, the funds for trade are internally settled.

Process of fund settlement in the 2-in-1 account

In an NRI 2-in-1 account, your funds are not directly transferred to your trading account. You need to transfer funds to the PIS enabled bank account before trading. At the end of the day, your broker will send a contract note to the bank detailing your buying transactions. The bank then credits money to the broker's account.

Steps to Buy/Sell Stocks by NRI

 

 

  1. Transfer funds from your NRE/NRO bank account to your PIS Bank Account. The bank will inform your broker on how much funds have been allocated. This is then updated on the trading account as an available limit. The money is held in your PIS bank account.
  2. Pick and online trading software (mobile app or website) offered by the broker and log in.
  3. Go to the watchlist and add the stocks of your interest.
  4. Click on the buy/sell button next to the selected stock.
  5. Fill the order forms with the following detail:
    • Order Type - Market or Limit
    • Quantity- Enter the number of shares you want to buy.
    • Price - In case you select the limit order type.
    • Click Submit
  6. Your broker's system will check the availability of the funds in your trading account (for 'buy' orders) or your demat account (for 'sell orders'). If you have sufficient funds/shares the order will be placed to the stock exchange.
  7. Once the buyer/seller found, the order gets executed at the exchange and a confirmation is sent in the trading application.
  8. At the end of the day, a contract note is prepared by the broker and sent to the bank and the customer by email. The contract note provides the details of a trade with stock name, quantity, trade value, brokerage, and taxes, etc.
  9. In the case of buy order, the bank transfers the funds to the broker. The shares are deposited in your demat account on T+2 days where T is the day of trading.
  10. In the case of a sell transaction, shares are withdrawn from your demat account. The funds are deposited by the broker into the linked NRI bank account on T+2 day.
  11. Bank reports all the transactions from NRI Bank Account (PIS enabled) to the RBI daily.

Note:

  1. Please make sure that the securities are not in the RBI ban list before executing the order.
  2. Make sure funds for purchases and securities are available before executing any buy/sell order.
  3. Securities will be transferred to the respective repatriable/non-repatriable demat account depending upon whether the purchases are made on repatriation or non-repatriation basis.
  4. Buy transactions in the cash segment are settled by delivery only.

FAQ's

  1. 1. Can NRIs buy/sell stock online in Indian Stock Markets?

    Yes, most stock brokers offer the online trading facility to NRIs. This mainly includes online discount brokers offering 2-in-1 account (trading and demat) i.e. Zerodha, Prostocks.

    However, there are some stock brokers, mostly banks offering 3-in-1 account, who may not offer online trading services, particularly to US and Canada based NRIs due to additional compliance requirements. Please check with the stock broker before opening the trading account.

    NRIs can use the online trading software provided by the stock broker to place buy/sell orders online. The trading software and process to place a buy/sell order are similar to resident Indian customers.

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  2. 2. What are the options available to an NRI to place trading orders?

    An NRI can place a buy/sell order in the Indian Stock Exchange in 3 ways:

    1. Online Trading: An NRI can use any of the online trading software provided by your stock broker to place buy/sell orders online.
    2. Call & Trade: Most brokers offer call n trade facility wherein you can place a buy/sell order on the phone. You need to call a dedicated phone number, authenticate yourself and then direct the representative to place orders.
    3. Relationship Managers: Some brokers don't allow online trading facilities to US-based NRIs. Such investors need to communicate with their Relationship Managers and place orders through them.

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