Indian financial markets are closed to foreign citizens holding a foreign passport; however PIOs (person of Indian origin) and OCIs (overseas citizenship holder of India) can invest money in the Indian capital markets. Primarily, they need to have a bank account in India to invest money in Indian mutual funds. The NRI bank account that can be used for a mutual fund investment can be either an NRE or an NRO bank account.
Specifically, an NRE bank account is known as a non-resident external account and NRO stands for non-resident ordinary account. An NRE account is one which an NRI can use to invert money into mutual funds on a repatriable basis, meaning that whatever amount he invests can be taken back abroad along with the profit generated with such types of investments. On the other hand, an NRO bank account is one which does not have a repatriation facility.
Non Resident Indians including PIO (person of India origin) holding PIO card and OCI (overseas citizens of India) can make investments in Indian Capital Market.
From now on, for simplification we would be using the term NRI/NRIs in general for all non resident Indian categories, either it be a PIO (holding PIO card) or an OCI.
Before we get into the Trading details, we need to understand a little more about these 2 types of NRI bank accounts mainly:
a) NRE Bank Account.
b) NRO Bank Account.
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Under NRE [Non Resident (External) Rupee Account] accounts, funds can be repatriated whereas funds under NRO [Ordinary Non Resident Rupee Account] accounts are non repatriable.
1. NRO Bank Account: Non-Resident (Ordinary): NRIs can also use this account to invest into Mutual Funds of India and IPOs on non-repatriable basis.
2. NRE Bank Account: Non-Resident (External) Rupee Account: Can also be used by NRIs to invest in Indian Mutual Funds on repatriable basis.
For investments in Indian stocks, an NRI needs an NRI bank account, a PIS account, and a demat plus trading account with a broker for online trading.
Important Documents needed for Trading:
1. For NRIs documents required are: PAN Card + Indian passport copy.
2. For OCIs: OCI Card copy + PAN Card
3. For PIOs: PIO Card + Foreign Passport Copy showing Indian birth place + PAN Card.(More details on these rules can be obtained from http://www.NriInvestIndia.com)
NRIs can invest in both Primary Market and Secondary Market through a registered broker. These brokers offer wide range of services to ensure that NRIs feel at home while they take their investment decisions.
NRI Mutual fund investment in India can be done in 2 different ways.
1. Investments via using Power of Attorney.
2. Investments without power of attorney.
Mutual Fund Investments for NRIs can also be done in a conventional way (safe). This conventional way is explained with an example considering us as a mutual fund distributor helping you with your mutual fund investments. Must: PAN card & NRE / NRO bank, and KYC if investment > Rs.50,000