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

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.

1. ‘Person of Indian Origin’ (PIO) means a citizen of any country other than Bangladesh or Pakistan, if
   1. he at any time held Indian passport; or
   2. 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
   3. 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.

‘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.

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.

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.

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.

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

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.

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.

No.

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.

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.

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.

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.

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.