To understand the concept fully, you must know: A Non-resident India or an NRI is cannot purchase stocks and convertible debentures of a domestic organization through the stock exchange. If an NRI wishes to invest, they have to follow particular guidelines, like making a trader profile under the Portfolio Investment NRI scheme also known as (PINS) either on a non-repatriation or repatriation basis.
What are the guidelines for an NRI Trading Account?
The guidelines of the reserve bank of India clearly state an NRI must open a trading account with a recognized institute authorized by RBI. They can choose to have a Non-Resident Ordinary (NRO) or Non-Resident External Account to avail of the benefits of the stock market in the Indian equity market.
Types of Accounts an NRI can open in India for Stock Market Trading:
The account type allows you to buy or sell the equities through the Indian stock exchanges. It can further be classified as NRE or NRO PINS accounts. NRE PINS allows transactions of the funds to be repatriated to foreign countries. This means an NRI can transfer the funds to a foreign account. One the other hand NRO doesn’t offer the same flexibility to fund repatriate.
The account type is used for investing in IPOs or Initial Public Offering. Using this type of account an NRI can also invest in other financial instruments including Mutual Funds. It too can further be classified into NRE or NRO Non-PINS account. Similar to that in PINS account the NRE account allows fund repatriation but NRO doesn’t. What is different here is the NRO Non-PINS account allows you to trade in futures and options.
Important Note: The working of a PINS account is very similar to that of an NRE account, but even if an NRI has an NRE account they must have a PINS account to perform any trade-in equity. Also, an NRI can have only one pin account at any point in time.
Bank Branch to Associate
To open the PINS account an NRI has to follow the guidelines of RBI where it clearly states, they can only open an account at the designated branches of dealers that are authorized by the RBI. For more information, you can go on to the RBI website to find various authorized dealers.
Application Form to Apply
To open a PINS account, a user necessarily needs to fill and submit an application form at the designated branch of the authorized dealer of their choice. An NRI has to provide information relating to any transactions that they have made in the primary market. Also, a PINS Demat account form as to be submitted to start trading.
- Copy of their passport
- Employment Visa or Work Permit
- Address Proof
Also, you will be asked to present a PINS permission letter from the authorized dealer, PAN card, photograph, Proofs of depository and bank account details.