NRI Demat Account Opening Process

NRI Demat Account Opening Process

Who is an NRI

NRI stands for Non-Resident Indian, which refers to an Indian citizen who lives outside of India for more than 182 days in a financial year. This definition is provided by the Indian government for the purpose of taxation and other legal purposes. NRIs may hold Indian passports, but they are not considered residents of India for the duration of their stay abroad.

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Table of Content

  1. Who is an NRI
  2. Here is the NRI Demat Account opening process flow
  3. Benefits of Demat account for NRI
  4. How to open NRI Account?
  5. Documents Required for an NRI Account 
  6. NRE Demat Account and NRO Demat Account
  7. Why Do You Need a Separate NRI Demat Account?

Here is the NRI Demat Account opening process flow

  • The first step is to compile all the requisite documents for the process in one place, so you don’t have to grope around for documents at the last minute. Among key inputs, the most essential are your PAN card, details of NRI bank account, and a PINS permission letter issued by the RBI in case of an NRE Demat account opening.
  • All documents must be verified by the Indian Embassy in your residential country or by a competent authority approved by SEBI.
  • Here, the NRI needs to do homework on the various DP by asking questions like what are the services that the Demat account will give me, what are the AMC charges, is the DP offering you a good deal for your money, do you need an NRE / NRO account etc.
  • After filling out the account opening application, scanned copies of all required documents must be uploaded. On submission of required documents, an NRI Demat application is processed.
  • Demat account opening process for NRIs is not too different from that for resident Indians. The two challenges are selecting the right Demat account for the NRI and doing the paperwork meticulously. The rest follows logically.

Benefits of Demat account for NRI

The NRI Demat account has the following benefits:

  • Anywhere in the world, an NRI can swiftly and easily invest in the Indian stock market. 
  • The NRI's transactions are instantly reflected in their Demat account. 
  • Additionally, there is less physical documentation of the transactions.
  • In NRI Demat accounts, transactions are completed promptly and effectively.
  • The chance of forgery, physical document loss, delivery delays, and other issues is relatively low with NRI Demat accounts. 
  • Even one share can be kept in the very minimum NRI Demat account. 
  • An NRI may invest in securities such as stocks, convertible debentures, mutual funds, ETFs, etc.

How to open NRI Account?

A bank registered with NSDL and CDSL, stockbrokers, or a depository participant are all acceptable places to open a NRI Demat account and a trading account. As a result, banks offer three-in-one account services, while stockbrokers offer two-in-one. But all three of them provide the necessities to open Demat account.

The NRI must first choose whether they want a "repatriable Demat account" or a "non-repatriable Demat account," depending on their preference. They have the option of opening a Demat account offline or online.

 

Here are the steps involved in opening an NRI account:

  1. Download and complete the account opening form to open a Demat account.
  2. The appropriate documents must then be attached as the next step. The Indian embassy or another appropriate body must notarize and self-attest the documents. 
  3. Send the completed form to the registrant that has been selected by the person.

 

The following should be in order before NRIs open a Demat or trading account:

  • The applicant's PAN card
  • An NRI bank account (NRE or NRO) 
  • A PIS letter of permission provided by the RBI of India directly to the NRI applicant.

Documents Required for an NRI Account 

Here’s a list of documents required for an NRI account:

  1. A properly completed and signed account opening form for the account holders.
  2. Letter of approval for the Portfolio Investment Scheme (PIS) given to the NRI applicant directly by the RBI of India. 
  3. A passport-sized photo of the account holder, with their signature across it.
  4. PAN card scans as verification of the holder's overseas address.
  5. Passport and visa photocopies.
  6. A Demat account must be linked to a canceled check from an NRO or NRE bank account.
  7. The nominee's photo and signature are required in order to use the Demat account's nomination feature.

NRE Demat Account and NRO Demat Account

Just as there is a Demat account for resident Indians, there is also a separate Demat account for NRI. In terms of Demat holdings, NRIs differ slightly from retail investors in terms of documents needed and whether these are repatriable. For instance, the NRI Demat account can either be a repatriable or a non-repatriable Demat account. That would largely determine whether it was a NRO Demat account or an NRE Demat account.

Just as you have NRE and NRO bank accounts, a similar classification is available for Demat accounts. 

Let us look at the two types of Demat account for NRIs in India.

  • NRE (Non-Resident External) Demat Account:

NRIs typically use this Demat account to buy or sell securities on a repatriable basis. Typically, any funds earned abroad are kept in an NRE account and such funds can be invested in Indian stocks on a freely repatriable basis. When you invest in Indian stocks through the NRE Demat account, you can only make investments in the stock market through the Portfolio Investment NRI Scheme (PINS) route. The principal amount and dividends/interest of NRE Demat accounts can be freely repatriated.

  • NRO (Non-Resident Ordinary) Demat Account:

This is the resident version of the NRI trading account NRO Demat account is typically used to trade in shares, futures, and options on a non-repatriable basis. NRIs typically park funds earned in India in the NRO account. When you open an NRO Demat account, you need not go through the PINS route and are permitted to repatriate up to $1 million in a financial year. While the principal amount is repatriable, the interest or dividends generated is non-repatriable.

NRI Demat account opening is largely similar to a resident Demat account, albeit with some additional documentation requirements. 

Why Do You Need a Separate NRI Demat Account?

The need for a separate NRI Demat account arises from the fact that not all NRI funds are freely repatriable from India. Also, the way the NRI submits the documents and the compliance requirements are also different for an NRI. After all, Indian stock markets get a lot of investments coming from around the world, including NRIs and FPIs. In the case of NRIs, the procedure for opening a Demat is largely similar to that for resident Indians, barring a few minor procedural differences. It can also be operated similarly. The distinction starts with the fact that you first need to declare your status as an NRI or otherwise based on the residency requirements stipulated by the RBI. NRI customers can opt for the account type that suits them best.

 

Conclusion

Opening a Demat account for non-resident Indians (NRIs) is a convenient way to invest in Indian stock markets. To start the process, you need to find an authorised Depository Participant (DP) and submit the required KYC documents like passport, overseas address proof, and PIO card. Comparing the account opening charges, AMC fees, transaction costs, etc., between DPs is important to choose the right one. Once the NRE or NRO Demat account is opened, NRIs can operate it online to buy or sell permitted securities as per FEMA guidelines. Managing the Power of Attorney is crucial for smooth account operations from overseas. With proper documentation, due diligence, and understanding of regulations, NRIs can easily open their Demat account remotely and participate in the vibrant Indian equity markets while residing abroad.

Frequently Asked Questions

In order to trade in stocks, NRIs may open a combined NRI Demat account. The initial account holder's name will appear on the PIS account, Demat account, and trading account. A NRI should also be the second account holder. Along with the FEMA declarations and the FATCA filings, they should also provide KYC documents. Most crucially, after completing KYC, one can trade on the securities markets.

Yes, exchange-traded funds (ETFs) are open to NRI investors in India. They have the option of investing on both a repatriation basis and a non-repatriation basis.

In India, NRIs are able to open Demat accounts. They would need RBI permission for the PIS (Portfolio Investment Scheme). NRIs can purchase & trade shares on the Indian stock exchange thanks to the PIS.


 

Go to 'Service Request' or 'Update Profile' in your account to alter the phone nos. in the Demat account you have. You can adjust your email address or mobile number in your Demat account.