Portfolio Investment Scheme (PIS)

PIS permits an NRI to invest in Stocks and Mutual Funds through stock exchanges in India. NRIs can invest on a repatriation or a non-repatriation basis through PIS.

Portfolio Investment Scheme (PIS or PINS) permits NRIs to invest in Stocks through stock exchanges in India. Under this scheme, all the transactions are reported to the RBI.

An NRI can invest in the Indian stock market on repatriation or non-repatriation basis. For investment on a repatriation basis, an NRI needs a PIS enabled NRE account. For investment on a non-repatriation basis, earlier NRIs required PIS enabled NRO account. However, with relaxation in rules for non-repatriable investments, an NRI can now invest in Indian equity without PIS permission through the NRO Savings account (without PIS). However, still, not all brokers are ready to offer trading services without PIS and PIS enabled NRO account is required in some instances. Read about NRE Vs NRO account.

After opening the NRI bank account, an NRI has to fill a form 'Application for designating bank account for PIS' and submit it to the bank. Once approved, the requested bank account (NRE or NRO) is designated as PIS Account. All transactions in this account are reported to RBI. This account is now linked with NRI Demat and NRI Trading account for stock trading.

In the PIS registration process, an NRI appoints a specific branch of a bank as a Designated Bank for PIS.

An NRI Bank Account is designated as PIS Bank Account after the approval of the PIS application. The Reserve Bank has authorized only a few bank branches of the bank to conduct the business under PIS on behalf of NRIs.

Sample PIS Forms:

• ICICI Bank NRI PIS Form
• HDFC Bank Application for NRI PIS
• Kotak Mahindra Bank NRO PIS Account Opening Form

NRI should read the terms in these forms in detail to understand the limitations for PIS Account.

Note:

• PIS account is not required for trading in Equity Derivatives (F&O) since the funds are settled through the Custodial. An NRI can use an NRO-SB to trade in F&O.
• NRE PIS accounts and PIS PERMISSION should be held with only one bank at any given point in time.
• NRE PIS account should not be used to route any other transactions besides transactions related to the purchase and sale of shares. All routine transactions, Demat charges, etc should be routed through the regular NRE NON-PIS savings account held with the bank.
• If the demat account is NRE Demat Account, the dividends are deposited in the linked NRE saving bank account or NRE PIS.
• If the demat account is an NRO Demat Account, the dividends are deposited in the linked NRO saving bank account.

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Transactions permitted under PIS

• Purchase of shares in the Indian companies through Stock Exchanges as an NRI
• Sale of shares, which were bought under PIS
• Shares received under corporate actions such as stock split.

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Transaction permitted under Non-PIS

• Mutual Funds and IPOs.
• Sale of shares, which were, acquired other than under PIS. A few examples are:
  • Shares acquired through IPOs/Right Issues/ ESOP.
  • Gifts from relatives or otherwise
  • Shares bought as resident Indian
  • Shares received in bonus
  • Shares acquired through NRO account via non-PIS route

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PIS Account (NRI PIS Bank Account)

An NRI Bank Account (NRE or NRO) is designed as a PIS Account once the PIS application is approved by the bank.

After opening NRI bank account, the customer has to submit a PIS application form to the bank for designating the Saving Account as PIS Account on repatriation/non-repatriation basis.

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Non-PIS NRI Bank Account

The Non-PIS Accounts is an NRI Saving account without PIS permission from RBI.

When a customer opens an NRI Bank account (NRO or NRE), initially the account is known as an Non-PIS Account. Customers can fill the PIS application form, submit it to the bank and get the PIS approval on this account. Once the PIS permission is received, the account is designated as PIS Account.

Note:

• Transactions from a Non-PIS account are not reported to the RBI.
• The Non-PIS account can be used to sell shares which are not allowed under PIS. i.e. Shares bought when NRI was resident Indian
• Shares acquired under IPO or received as a gift or bought as resident Indian can be sold under Non-PIS account.
• With relaxation in rules by RBI, the Non-PIS account can be used for buying and selling shares on stock exchange without routing through the PIS route.

Banks like Axis Bank makes it mandatory to open a separate Non-PIS account along with a PIS Account. Their popular offering is a 4-in-1 Account which includes:

• NRE bank account (PIS-Linked)
• NRO bank account (Non-PIS)
• NRI Demat Account
• NRI Trading Account

 

 

Answered on 2021-11-25

1. 1. Can an NRI invest in shares listed in the stock exchanges in India?

   Yes. NRIs (including PIO and OCI Card holders) can invest in the India Stock Market. The investment has to be done under the Portfolio Investment Scheme (PIS) for trading on a repatriation basis. Some of the key rules relating to this scheme are as given below:

   • Shares purchased under PIS shall be sold on stock exchanges only.
   • These trades can be done only through a registered broker.
   • NRI shall designate a branch of a bank and route all his transactions through this branch.
   • An NRI can purchase shares up to 5% of the paid-up capital of an Indian company.

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2. 2. How to transfer bonus shares from PIS to Non-PIS Account?

   Bonus shares cannot be sold through PIS account. You need to transfer them to Non-PIS Account to sell them.

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3. 3. What documents are required for NRI PIS Application?

   An NRI need following self-attested copies of the document for PIS permission:

   • Valid Passport and visa Copy of main applicant self-attested
   • PAN Card Copy if not updated in SB account
   • Copy of PIO/OCI card (only if the customer is Person of Indian Origin)

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4. 4. Can I have multiple PIS linked accounts?

   No. As per the RBI guidelines, an NRI can have one and only one Portfolio Investment Scheme (PIS) linked bank account. If you would like to open a PIS account with another bank, you will have to close the existing PIS account first.

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5. 5. What is NRI PIS Account?

   PIS is a scheme by RBI to regulate the total investment limit of the NRIs and execute hassle-free transactions. Previously, NRIs had to invest in the Indian stock market through NRE or NRO accounts under PIS. When an NRI invest through PIS account, it becomes easy for RBI to monitor the money flow in investments made by the NRI's. As per the revised norms of RBI, now it is not compulsory to invest under PIS while investing through NRO account in India. In the new process, the transactions in the non-repatriable mode are not reported to RBI.

   Key Features of NRI PIS Account

   • NRIs have to operate an NRI account separately with the designated bank for PIS purpose. You can also call it an NRI PIS account.
   • Under the portfolio investment scheme, the NRI can buy/sell stocks and convertible debentures of the companies.
   • Joint NRI Account for multiple holders can be opened.
   • You have to open NRE and NRO accounts for repatriable and non-repatriable purposes, respectively.
   • The investment made by the NRIs is regularly reported by the designated banks.
   • NRIs cannot maintain more than one PIS account. The contract notes for both purchase and sale transaction should be submitted within 24/48 hours of the execution of the contracts to the designated branch with whom the PIS account is maintained.

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6. 6. How can NRI invest in the Indian stock market without PIS?

   An NRI can invest in the Indian stock market without PIS (Portfolio Investment Scheme) subject to certain restrictions. However, an NRI is only allowed to invest in following shares through a non-PIS account:

   • Shares acquired through a non- PIS.
   • Shares bought through IPO's.
   • Shares gifted from relatives.
   • Shares bought as resident Indian.

   The investments without a PIS account will be considered as domestic investments and will be treated at par with the investments made by resident Indians. To invest without PIS, you need to use a non-PIS bank account.

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7. 7. Is the PIS account required for an NRO account?

   No, PIS permission is not required for an NRO (Non-Resident Ordinary) account.

   Previously, the NRI had to open NRE and NRO accounts under PIS regulated by RBI. Now, the RBI regulatory norms have been relaxed for NRO account holders to transact easily without following PIS rules.

   The buying and selling transactions are executed through the NRI demat account and NRI Savings account with the stock exchange and bank, respectively.

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8. 8. Which Banks in India offer PIS account?

   Almost all the major banks in India offer PIS account services through its designated branches that have been authorized by the Reserve Bank of India to manage PIS. The popular banks offering PIS account include ICICI, HDFC, SBI and Axis bank.

   The PIS account only required for NRIs to trade/invest on a repatriation basis. For investing or trading on a non-repatriation basis, NRI can open an NRO Account (Non-PIS). Unlike the PIS bank account, transactions from the NRO bank account are not reported to RBI. NRO trading account allows you to invest in Equity, Equity F&O and Currency F&O on a non-repatriation basis.

   List of Banks in India who offer NRI PIS account

   • ICICI Bank
   • HDFC Bank
   • SBI Bank
   • Axis Bank
   • Kotak Mahindra Bank
   • Deutsche Bank
   • Bank of Baroda
   • Federal Bank
   • South Indian Bank.

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9. 9. Can the PIS account be opened with a joint holder?

   The RBI guidelines require NRI to open a 'single designated' account (NRE/NRO account) under the PIS for routing investments in the Indian stock market.

   Based on these guidelines, some banks like Axis Bank, HDFC Bank do not allow NRIs to open PIS as a joint account.

   Few other banks like ICICI and SBI offer to open a PIS account with a joint holder, however, the monitoring of transactions is done only for the main applicant.

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10. 10. How RBI monitors the investment positions of the NRIs?

    All transactions from NRI PIS Bank Account are reported to RBI daily by the bank.

    RBI also keeps track of the investment position of NRIs reported by designated bank in the listed companies daily. When this limit touches 2% below the sectoral cap for NRIs, the RBI issues a caution list to the designated bank mentioning that the further purchase in this company will need prior notice from RBI.

    When the investment limit touches the sectoral limit, RBI places the company on the ban list. No NRI can invest in such companies that are placed on the ban list.

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11. 11. Can shares acquired under PIS be transferred under private arrangements?

    The shares acquired by NRIs through the PIS route on the stock exchange cannot be transferred by way of sale under any private arrangement to a person resident in India or outside India without prior approval of the Reserve Bank.

    However, NRIs can transfer shares acquired under PIS to their relatives as defined in Section 6 of Companies Act, 1956, or to a charitable trust duly registered under the laws in India.

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