NRI Trading and Investment Process in India

Do you want to start trading in India as an NRI? Here is a complete guide for you on how NRIs can trade or invest on the Indian stock exchanges (BSE and NSE). Learn all about the types of NRI trading accounts required, NRI investing through an NRE or NRO bank account, PIS or non-PIS NRI account, and the process of NRI trading and investing through a 2-in-1 or 3-in-1 account.

We all know that NRIs (Non-resident Indians) or PIOs (Persons of Indian Origin) can invest in the Indian market, but there are certain rules, regulations, and compliance requirements that apply to NRI trading and investing. NRIs can invest in the Indian stock exchanges on a repatriation or non-repatriation basis. They are allowed to invest in equities, ETFs, IPOs, mutual funds, government securities, treasury bills, and trading in stocks in the F&O segment.

Let us first understand the types of NRI accounts required for trading in different segments.

NRI Trading Requirements

If you are an NRI and want to buy and sell stocks, mutual funds, IPOs or trade in F&O, you need three different accounts: an NRE/NRO bank account, a repatriable or non-repatriable demat account, and an NRI trading account.

RBI PIS (Portfolio Investment Scheme) permission is important when it comes to NRI investments as it is a mechanism developed by RBI to enable NRIs to trade in the Indian market with easy reporting to RBI. Earlier RBI mandated all NRIs to open NRE or NRO accounts under PIS route but now RBI has facilitated NRI/PIO investments under both PIS and non-PIS accounts.

List of NRI accounts required for trade or investment in India on a repatriation or non-repatriation basis.

Types of NRI Trading Account and Fund Transfer & Settlement

Depending on the type of stockbroker (discount or full-service) you wish to open an NRI account with, it may be either an NRI 2-in-1 account or a 3-in-1 NRI trading account. The fund transfer and settlement process works differently for both. Here are the details;

1. NRI 3-in-1 account

As the name suggests, it combines or integrates 3 different accounts: NRI Demat Account, NRI Trading Account, and NRE/NRO Bank Account with PIS approval.

Most full-service brokers in India who are part of a bank like ICICI Direct, HDFC Sec, SBI Cap, etc. offer NRIs the option to open a 3-in-1 trading account. It is also called a 4-in-1 NRI trading account as some brokers open a PIS and a non-PIS NRI bank account.

In a 3-in-1 account, the NRI deposits funds into his PIS bank account and all funds required for trading are handled internally. For example, when a buy order is placed, the NRI PIS account is debited up to the amount of the placed order. However, for sell transactions, the account is credited with the same amount, minus TDS if applicable. Thus, seamless transfer of funds between your NRI bank and trading account is the key benefit of a 3-in-1 NRI trading account in India.

All transactions done through the PIS account are reported to RBI on a daily basis.

2. NRI 2-in-1 Account

The NRI 2-in-1 account is a combination of NRI trading and demat accounts.

In India, discount brokers that do not have banking licenses offer to open 2-in-1 accounts for both residents and NRIs. However, some of these discount brokers (Zerodha, Fyers, etc.) work with third-party banks to help non-residents get approval to open a PIS account at RBI PIS.

The fund transfer process works differently for the 2-in-1 NRI account. In the case of the PIS account, the stockbroker must ask the third-party bank for a fund statement. For this purpose, the broker sends a contract note at the end of each day and the bank credits the broker’s account.

In the case of an NRO account (not PIS), the funds for NRI trading are held by the stockbroker, as the NRI must transfer the funds to the NRI trading account.

NRI Trading Process with 3-in-1 Account

NRIs can trade using multiple platforms be it mobile app, desktop trading terminals, or web platforms. Select anyone of your choice and follow these steps to trade or invest in the Indian stock market.

1. Log in to your NRI trading account using account credentials.
2. Select the desired scrip or stock, you want to invest in.
3. Place “Buy/Sell” order, as the case may be.
4. Enter the following details in the order window;

• Exchange – BSE or NSE
• Quantity: Number of shares you want to purchase or sell.
• Order type: Market (Buy or sell shares at current market price) or Limit order (Buy or sell shares at specified price).
• Price: Enter the price at which, you want to execute your stock buy or sell order.
• Recheck and submit the order.

5. Once the Buy/Sell order is placed, your broker will check the funds available in your PIS-linked bank account. If sufficient funds are available, the order will be placed on the exchange otherwise, rejected subject to insufficient margin available.
6. If your order gets matched on the exchange, it will be executed and intimated to you.
7. Your broker will send a contract note to your registered email at the end of each trading session. The contract note contains information about the stock/s you have traded in, trade quantity, trade price, brokerage, and taxes.
8. When a buy order is executed, your NRE/NRO PIS account will be debited for the traded amount and you will get the delivery of shares in your NRE or NRO demat account within T+1 day.
9. When a sell transaction is executed, your NRI bank account will be credited to the extent of sale proceeds while securities will be debited from your NRI Demat account.

NRI Trading Process with 2-in-1 Account

Here is the step by step NRI 2-in-1 account trading process explained in detail for both PIS and non-PIS NRO trading account;

NRI 2-in-1 Account Trading Process with PIS

• Allocate funds from your NRE or NRO savings bank account to the PIS account. The same will be intimated by the bank to your broker who will update your trading limit or margin balance accordingly.
• Log in to your trading account on app, web, or desktop trading software.
• Add the scrip or stock of your choice to the watchlist.
• Tap on the “Buy/Sell” option as per your choice.
• Fill out the required details in the order entry window including order type (market/limit), number of shares (Quantity), price, and place the order.
• The stockbroker will verify the funds available for trading and if you have sufficient margin available, orders will be placed and executed on the relevant exchange.
• If a buy order is executed, your bank will credit or transfer the money from PIS account to the broker’s account or in the case of sell transactions executed, funds will be deposited to the NRI bank account, and securities will be accordingly credited or debited to your NRI Demat account within T+1 day.
• Your broker will also prepare and send a contract note to your email address to provide all the trading and brokerage details along with taxes.

NRI Investment through Non-PIS NRO 2-in-1 account

It is not mandatory for NRIs to get PIS approval from RBI for transactions routed through non-repatriation NRO account. Thus, NRIs are eligible to trade or invest in the Indian market using a no-PIS NRO bank account.

All the funds are kept with your broker on NRI trading with an NRO non-PIS account.

1. Log in to your NRI trading account with your broker.
2. Transfer funds to your NRI trading account.
3. Place stock buy or sell order of your choice.
4. Funds will be debited or credited to the extent of your trading order placed on the exchange. And, stocks will be credited or debited to your demat account.
5. Withdraw money from NRI trading account to the linked NRO bank account. You cannot repatriate more than USD 1 million abroad in a financial year, subject to RBI approval.

Important Points to Note about NRI Investment

• Getting PIS letter from RBI RBI-authorized bank is mandatory for an NRE bank account to trade in a secondary market.
• PIS is not mandatory for transactions placed through an NRO bank savings account. NRE Vs NRO
• F&O trading is available to NRIs only on NRO accounts along with a custodian participant code. Know more.
• NRI cannot trade in equity intraday.
• NRIs are not allowed to invest in RBI-banned scrips.
• Maximum NRI investment in a scrip cannot exceed 5% of the company’s total paid-up capital.
• Aggregate NRI investment in a company shall not exceed the 10% maximum ceiling of the paid-up capital. In the case of a special resolution passed, the maximum limit can be increased to 24%.
• NRIs are also not allowed to trade in certain stocks like the business of chit funds, Nidhi Company, agricultural or plantation activities, trading in Transferable Development Rights (TDRs), and Real estate business or construction of farmhouses.

Final Words

Non-resident Indians can open either a 2-in-1 or 3-in-1 trading account in India to invest in the Indian stock market. However, seeking PIS approval is mandatory for NRE bank accounts to invest in equities. However, NRIs are also allowed to open a no-PIS NRO-linked trading account.