1. Who is a Non-Resident Indian [NRI]?

Ans. Non- Resident Indian [NRI] means a ‘person resident outside India’ who is a citizen of India or is a ‘person of Indian origin’.

2. Who is a ‘person resident outside India’?

Ans. 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.

3. Who is a ‘person of Indian origin’?

Ans. Person of Indian Origin’ (PIO) means a citizen of any country other than Bangladesh or Pakistan, if a. he at any time held Indian passport; or b. 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 c. 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.

4. What is an ‘Overseas Corporate Body’ [OCB]?

Ans.‘Overseas Corporate Body’ means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty percent by Non-Resident Indians and includes overseas trust in which not less than sixty percent beneficial interest is held by Non-Resident Indians directly or indirectly but irrevocably.OCBs were debarred from Portfolio Investment Scheme w.e.f November 29, 2001. OCBs have been banned as a class of investor w.e.f September 16, 2003. However, they have been permitted to continue to hold the securities acquired by them prior to these dates. Accordingly OCBs may open a demat account, however it can be only for the purpose of dematerializing the existing holdings.

5. Where can an NRI/PIO open a demat account?

Ans.NRI/PIO can open a demat account with any Depository Participant [DP] of NSDL. The NRI/PIO needs to mention the type [‘NRI’ as compared to ‘Resident’] and the sub-type [‘Repatriable’ or ‘Non-Repatriable’] in the account opening form collected from the DP.

6.Does an NRI need any RBI permission to open a demat account?

Ans.No permission is required from RBI to open a demat account. However, credits and debits from demat account may require general or specific permissions as the case may be, from designated authorised dealers.

7.If NRI/PIO desires to make investments under different schemes, can he hold all such securities in a single demat account?

Ans.No. Securities received against investments under ‘Foreign Direct Investment scheme (FDI)’, ‘Portfolio Investment scheme (PIS)’ and ‘Scheme for Investment’ on non – repatriation basis have to be credited into separate demat accounts. Investment under PIS could be on repatriation or non – repatriation basis. Investment under FDI scheme is on repatriation basis.

8.Does an NRI require RBI permission for dematerialiation/rematerialisation of securities?

Ans.No special permission is required. Holding securities in demat only constitutes change in form and does not need any special permission. However, only those physical securities which already have the status as NR – Repatriable / NR- Non-Repatriable can be dematerialised in the corresponding Depository Accounts.

9.Can securities purchased under repatriable and non-repatriable category be held in a single demat account?

Ans.No An NRI must open separate demat accounts for holding ‘repatriable’ and 'non-repatriable’ securities.

10.In case a person who is resident in India becomes a non-resident, will he/she be required to change the status of his/her holding from Resident to Non-Resident?

Ans.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.

11.In case a non-resident Indian becomes a resident in India, will he/she be required to change the status of his/her holding from Non-Resident to Resident?

Ans.Yes. It is the responsibility of the NRI to inform the change of status to the designated authorised 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.

12.Can an NRI purchase securities by subscribing to public issue? What are the permissions/approvals required?

Ans.Yes. The issuing company is required to issue shares to NRI on the basis of specific or general permission from GoI/RBI. Therefore, individual NRI need not obtain any permission.

13.Does an NRI require any permission to receive bonus/rights shares?

Ans. No

14.What is Portfolio Investment Scheme?

Ans. Under this scheme, NRIs are permitted to acquire shares/debentures of Indian companies or units of domestic Mutual Funds through the stock exchange(s) in India. Investment can be made both on repatriation or non-repatriation basis. For making investment on repatriation basis, it will be necessary to make payments by way of inward remittance or by debit to the NRE / FCNR account of the NRI / PIO. Investment on non-repatriation basis can also be made by way of inward remittance or by debit to the NRE / FCNR / NRO accounts.
The sale proceeds of the repatriable investments can be credited to the NRE / NRO accounts of the NRI / PIO at the option of the investor, whereas the sale proceeds of non-repatriable investment can be credited only to NRO accounts. The sale of shares will be subject to payment of applicable taxes.

15.What is the procedure for making applications for Portfolio Investment Scheme?

Ans.The application is to be submitted to a designated branch of an authorised dealer in India in the prescribed form. No permission is required from RBI.

16. What is a designated branch?

Ans. Reserve Bank has authorised a few branches of each authorised dealer to conduct the business under Portfolio Investment Scheme on behalf of NRIs. These branches are the main branches of major commercial banks. NRIs will have to route their applications through any of the designated authorised dealer branches who have authorisation from Reserve Bank.

17. Whether NRI can apply through more than one authorised dealer?

No. NRI can select only one authorised dealer for the purpose of investment under Portfolio Investment Scheme and route the transactions through the branch designated by the authorised dealer.

18. Can an NRI purchase or sell shares or convertible debentures on a stock exchange in India on repatriation or non-repatriation basis under portfolio investment scheme?

Ans. NRIs / PIOs can purchase / sell shares / convertible debentures of Indian companies on Stock Exchanges under the Portfolio Investment Scheme. The rules relating to this scheme are as given below:

19. Can an NRI purchase or sell shares or convertible debentures on a stock exchange in India on repatriation or non-repatriation basis under portfolio investment scheme?

Ans. NRIs / PIOs can purchase / sell shares / convertible debentures of Indian companies on Stock Exchanges under the Portfolio Investment Scheme. The rules relating to this scheme are as given below:
(ii) Shares purchased under PIS on Stock Exchange shall be sold on stock exchanges only. Prior approval of RBI is required if such shares are proposed to be transferred either by way of gift or under private arrangement to a non-resident/ resident.
(iii) These trades can be done only through a registered broker on a recognised stock exchange
(iv) NRI shall designate a branch of an authorised dealer and route all his/her transactions through this branch of the authorised dealer.
(v) NRI takes delivery of the shares purchased and gives delivery of shares sold.
(vi) NRI shall abide by the directions given by RBI/SEBI or such authority if the transaction results in the breach of ceilings stipulated for NRI holding in the company/scheme. The sale of shares will be subject to payment of applicable taxes.
An NRI or a PIO can purchase shares up to 5% of the paid up capital of an Indian company. All NRIs / PIOs (also the OCBs who had purchased shares under the earlier scheme) taken together cannot purchase more than 10% of the paid up value of the company. (This limit can be increased by an Indian company to 24% by passing a General Body resolution).

20. What are the permissions required for the transfer of securities by NRI/ PIO through off-market trade (transfers outside the purview of Portfolio Investment Scheme of RBI)?

Ans. The table given below summarizes the permissions required for the off-market transfer: From To Transaction Permissions Required NRI NRI Sale or Gift General permission, no specific permission to be taken* NRI Resident Indian Gift Prior approval of RBI required. NRI Resident Indian Sale under private arrangement General permission already available. Resident Indian NRI Gift Prior approval of RBI/FIPB should be obtained. Resident Indian NRI Sale under private arrangement General permission is already available provided the shares being transferred are not of the companies engaged in financial service sectors, such transfer does not attract SEBI takeover code and the activity of the company should be eligible for FDI. * provided that the person to whom the shares are being transferred has obtained prior permission of Central Government to acquire the shares, if he has previous venture or tie up in India through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment by whatever name called in the same field or allied filed in which the Indian company whose shares are being transferred is engaged.

21.Can a DP ask for RBI permission for executing instructions for purchase or sale?

Ans. An individual NRI cannot purchase under PIS shares exceeding 5% of the paid up capital of a company. The onus of monitoring this limit is that of the designated authorised dealer. Shares purchased under PIS scheme can be sold only through a stock exchange. See the rules explained under Q.No. 19. No permission is required from RBI to purchase or sell under Portfolio Investment Scheme.

22.Can an NRI nominate or be nominated in depository account? Whether such nominee can be person resident in India?

Ans. Yes

What type of bank account details is to be given at the time of account opening and subsequently [by way of change of details]?

Ans. The following bank accounts may be given: For non-repatriable - NRO [dividend/interest is repatriable] For repatriable - NRE The above details recorded by the DP in the demat account may be used by the Issuer to directly credit dividend or interest. (Dividend/interest received on Investments made on repatriation and non – repatriation basis under Portfolio Investment Scheme is not an eligible credit to NRE (PIS) Account and NRO (PIS) Account respectively).