Portfolio Investment Scheme (PIS) enables NRIs to purchase the shares and invest in the Indian Stock Market. PIS scheme is a part of the Reserve Bank of India. From the nominated branches of banks, NRIs can acquire shares or convertible debentures from the stock market through a bank account.
However, NRO (Non-Resident Ordinary) are treated as investments by residents; therefore, the PIS scheme is not required for them.
Firstly, you have to open a Non-Resident Rupee (NRE) account. The concerned bank should be approved by the Reserve Bank of India (RBI) for NRE accounts. The following steps are involved:
While opening the account at the PIS designated bank, the NRI investor has to submit the name of SEBI registered broker.
Once the bank received all the documents, it will issue a PIS permission letter for the NRE investment. You have to forward this letter to the broker.
Finally, NRI can open a Demat or trading account for investing with a broker.
The PIS account is specifically for the investment amount of NRI. All the purchases you make will be debited from your PIS account directly. Likewise, the sale proceeds are credited to the account. You need to have a PIS permission letter for opening a Demat and trading account for the investment.
Trading Account helps NRIs to purchase or sale transactions in the secondary market.
You need a Demat Account to hold the shares in the electronic format. All the shares you purchase are credited into your Demat account and are debited after their sale.
When you are an NRI investor in India, you have to follow some additional rules and restrictions as per the RBI mandates. Some of the details that you must know include the following:
• NRIs cannot hold more than 10% of the total holdings in an Indian listed company. In the case of public banks, this limit is 20%.
• You cannot have more than one PIS account, each for repatriable and non-repatriable shares.
• In order to manage the assets, you need to assign a Power of Attorney to an individual in India. It can be assigned generally wherein all the powers are given to one individual or specific to a particular asset class like property, bank accounts, etc.
