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Can NRI invest in IPO?

2 Mins 14 May 2021 0 COMMENT

NRIs are permitted to invest in Indian stock markets because they are Indians, but certain limitations exist. Today, we will look at how non-resident Indians can invest in the Indian stock market.

Who is an NRI?

Citizens and persons of Indian origin (PIO) get classified as NRIs under Indian law. NRIs are people who meet the following criteria.

  • You must be an Indian citizen living abroad or a Person of Indian Origin (PIO).
  • In a given fiscal year, your stay in India should be longer than 60 days but less than 182. Even if you spent 365 days or more in India in the previous four financial years, you will still get considered an NRI if you meet this requirement.
  • If you get assigned to a foreign country for more than six months, you may apply for NRI status.

Is it possible for NRIs to participate in an IPO?

  • NRIs will subscribe to the initial public offering if they have an NRE/NRO account (IPOs). The PIS account does not cover initial public offerings (IPOs). The company is responsible for informing the RBI of the number of shares it distributes to NRIs.

What are the fundamental conditions for non-resident Indians to invest in India?

An NRI should invest Indian rupees. As a result, to invest in Indian markets, an NRI must first open one of the three types of bank accounts mentioned below.

  • Non-Resident External Rupee Account Scheme (NRE Account)
  • Non-Resident Ordinary Rupee Account (NRO Account)
  • Foreign Currency Non-Resident Account (FCNR Account)

The documents needed to open these accounts are identical to those needed to complete KYC for residents. The Permanent Account Number is one of them. The three accounts, NRE, NRO, and FCNR, vary in several ways.

Since the NRE account is eternal, it can get repatriated. It means that NRE account holders will send money back to their home country. Since the NRO account is a resident account, it is non-repatriable after a year's cap of $1 million. The NRO account is ideal for NRIs who have income streams in India, such as pensions, rentals, etc.

Otherwise, an NRI does not need to do so since an investment made through an NRO Account gets treated as though a resident Indian made it. The funds in an FCNR account are kept in a foreign currency, equivalent to the funds in an NRE account.

Following the opening of a bank account, the NRI would need to open a Portfolio Investment Scheme (PIS) account. Only one PIS Account is approved for NRIs to invest in the stock markets. The bank will oversee the PINS post.

The name of your SEBI-registered broker must be given when opening a PIS account. The NRI will open a trading cum Demat account with a broker only after all the necessary documents have got submitted and the PIS letter for the account has been obtained. Besides, before a trading or Demat account can be opened, the NRI must sign and execute a FATCA (Foreign Account Tax Compliance Act) declaration.

Disclaimer : ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. Please note, I-Sec is acting as a distributor to offer IPO distribution related services and distribution of IPOs are not Exchange traded products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.