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Are you an NRI- Here is how you can open a demat account

03 Jan 2023 0 COMMENT

NRIs can open demat accounts, but they need to stick to certain guidelines laid down by the Foreign Exchange Management Act (FEMA)

The Indian equity market provides lucrative opportunities for NRIs. Many NRIs want to participate in India’s growth story by investing in the country’s stock markets.
Demat accounts are used to hold shares in an electronic, dematerialised form. The first step to start investing in stocks is to open a demat account. NRIs can also open a demat and trading account to trade in shares. However, they need to follow a slightly different procedure to open the demat account as compared to resident Indians.
As per FEMA guidelines, NRIs need to get a PIS (Portfolio Investment Scheme) approval from the RBI to invest in the secondary market in India. PIS approval is mandatory since any investment done through NRI accounts need to be reported to RBI.

How to open a demat account for NRIs:

An NRI must know that a trading and demat account cannot be converted to a new residential status. However, a Resident ICICI Bank account can be converted to an NRO status.  Also, if they wish to make fresh investments, they need PIS approval.

Opening a Demat account for NRIs – The procedure

NRIs who wish to open a demat account can do so in two ways – offline by visiting the offices of the DP on their visit to India or online (if they are abroad). Let’s say an NRI wishes to open a demat account. Here’s what he needs to do.

The offline process

To open the NRI account offline, NRIs need to be in India. They can visit the nearest branch of their broker/ and fill the account opening form, with the help of the sourcing staff. They must also submit the documents as per the Official Valid Documents (OVD) list, the details of which can be found in the account opening form. A representative at the DP’s office verifies the submitted documents with the originals, after which the NRI demat account is opened. They can also walk in to offices abroad and handover their completed account opening form at the nearest s Centre or branch of respective Bank/broker

The online process

NRIs who wish to open demat accounts after moving abroad can follow the online process. Such NRIs must first place their account opening request through the broker’s website.  Upon receiving the request, an office representative managing the online applications gets in touch with NRI customers and helps them fill the account opening form online.  NRIs need to submit the documents as per the OVD list. However, since the DP cannot verify the original documents, NRIs need to get them attested from their local bank or through the Indian Embassy in the country of residence. The DPs representative then picks up the account opening form and the verified documents through courier. The request is then processed in India and the NRI demat account is opened. 

Types of NRI demat accounts:

NRIs can maintain two types of demat accounts – repatriable and non-repatriable. They also need a basic PINS (Portfolio Investment Scheme) Account to buy shares from the secondary market.

Repatriable Demat Account:

Repatriable funds (funds which can be taken abroad) need to be kept in a separate bank account, i.e. an NRE account. Such accounts keep funds that are brought in from abroad. Proceeds from sales of such funds are allowed to be taken abroad. Such investments need to be maintained in a repatriable demat account.

Non-repatriable Demat Account:

Non-repatriable funds (funds that cannot be taken abroad) must be kept separate from repatriable funds. Such funds should be held in an NRO account. The proceeds from the sale of such investments cannot be taken abroad. The investments need to be maintained in a non-repatriable demat account. NRIs are allowed to invest in IPOs on a repatriable basis by using funds in their NRE accounts. However, an NRI cannot invest in the secondary market through this route.
Most DPs do not levy any demat account opening charges; however, customers have to pay the necessary service charges for transactions conducted through the demat account.
So, open a demat account in India and start investing.

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