Q.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’. 

Q.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.

Q.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, ifhe at any time held Indian passport; or 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 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.

Q.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.  

Q.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.

Q.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 banks.

Q.7. 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

Q8. 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.

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Q.9 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.

Q.10 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 bank 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.

Q.11 Can NRIs invest in shares, debentures and units of mutual funds in India?
Ans. NRIs are permitted to make direct investments in shares/ debentures of Indian companies/ units of mutual fund. They are also permitted to make portfolio investments i.e. purchase of share / debentures of Indian Companies through stock exchange. These facilities are granted both on repatriation and non-repatriation basis.

Q 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.

Q.13 Does an NRI require any permission to receive bonus/rights shares?
Ans. No.

Q.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.  

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Q.15. What is the procedure for making applications for Portfolio Investment Scheme?
Ans. The application is to be submitted to a designated branch of a bank in India in the prescribed form. Reserve Bank issues general permission for a period of five years, which can be renewed further by designated branch, concerned for a period of five years at a time.  

Q.16 What is a designated branch ?
Ans. Reserve Bank has authorised a few branches of each bank 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 bank branches who have authorisation from Reserve Bank.

Q.17 Whether NRI can apply through more than one designated branch ?
Ans. No. Each NRI has to select one branch for the purpose of investment under Portfolio Investment Scheme.

Q.18.Can an NRI purchase or sell shares or convertible debentures on a stock exchange in India on repatriation and/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:

(i) These trades can be done only through a registered broker on a recognised stock exchange.

NRI shall designate a branch of an authorised dealer and route all his/her transactions through this branch of the authorised dealer. NRI takes delivery of the shares purchased and gives delivery of shares sold.

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).    

Q 19. 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:

*  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.

Q.20. Can NRIs purchase existing shares / debentures of Indian companies by private arrangement?
Ans. Yes. Reserve Bank permits NRIs, on application in form FNC 7, to purchase shares / debentures of existing Indian companies on non-repatriation basis. An undertaking about non-repatriation is to be given in form NRU.

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Q.21. Can NRIs obtain loans abroad against the collateral of shares/debentures of Indian companies?
Ans. Yes. Authorised dealer have been permitted to grant loans/overdrafts abroad to NRIs through their overseas branches and correspondents against collateral of the shares/debentures of Indian companies held by them, provided the concerned shares/debentures were acquired on repatriation basis.  

Q.22. Can a DP ask for RBI permission for executing instructions of purchase and sale?
Ans. The purchase and sale of shares by NRI requires permission by Designated banks. Therefore, a DP may ask for a copy of the permission from designated bank before executing debit (sale) transaction. They may not also enable standing instruction for automatic credit unless the copy of permission from designated bank for sale/purchase is given. As this permission is not given for each transaction, the copy of the permission may be given only at the time permission is granted. 

Q.23. Can an NRI nominate or be nominated in depository account? Whether such nominee can be person resident in India?
Ans. Yes.

Q.24 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 bank details recorded by the DP may be used by the Issuer of securities to directly credit the dividend or interest.The following bank accounts may be given: For non-repatriable - NRO [dividend/interest is repatriable] For repatriable - NRE

Reference:
NRIs may read Master Circular number RBI/2004-05/4 dated July 01, 2004 relating to remittance facilities for NRIs/PIOs/Foreign nationals.

  RBI notification No: 20 dated 3rd May,2000.

  FAQs hosted on RBI Internet site www.rbi.org under the head "Chapter III - Investments in Securities /shares and company deposits.  

  Source: NSDL and FEMA Regulations  

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