Owing to the relaxation of RBI regulatory norms, Non-Resident Ordinary (NRO) bank account holders can transact without adhering to the stringent PIS rules. Now, transactions can be executed with the stock exchange and bank through NRI Demat and savings account. A process, that was once rather obtuse, has become efficient and convenient. NRIs are required to open a Demat bank account by following the regulatory guidelines set by Foreign Exchange Management Act (FEMA).
5 things to know while investing in Smallcases as an NRI
- You can invest in varied financial assets
When it comes to investments, you have quite a lot of options as an NRI. Some of the best financial assets to invest in India are –
- Gold ETF
- Direct Equity
- National Pension Scheme (NPS)
- Mutual Funds
- Government securities
- National Savings Certificate (NSC)
- Bonds and Non-Convertible Debentures (NCDs).
- NRI’s Invest in high-yield Primary & Secondary capital market
According to the Reserve Bank of India, Non-Resident Indians (NRI) and Person of Indian Origin (PIO) are free to invest in primary and secondary capital markets. The primary capital market deals with the issuance and trade of equity-backed securities directly between the issuer and the buyer.
Once companies have sold their offerings in the primary market, they trade the securities in the secondary market.
- Investment limitations
NRIs/PIOs are allowed to invest a maximum of 10% paid-up capital of Indian companies and 20% paid-up capital of public sector banks. This ceiling investment limit is monitored by the Reserve Bank of India daily. However, there are exceptions to this regulation and individuals can invest a higher percentage in certain selected companies.
NRI can resort to investing through the NRO-non PIS route without any limitation imposed on the corpus or ceiling investment. The secondary market transactions like IPO, mutual funds, ESOPs, Equity Derivatives, and likes are not reported to the RBI when conducted through non-PIS accounts.
- Hold on non-repatriation basis
NRI can hold financial assets on a non-repatriation basis when they invest through NRO bank accounts, meaning, the funds are not allowed to be moved freely to the NRI’s country of residence. And, the fund cannot be converted to a foreign currency either.
However, the Reserve Bank of India permits the transfer of up to 1 million USD to an NSE account every financial year. But, the transfer is subjected to applicable taxes.
- Delivery based trading
As an NRI, you can only make delivery-based trade in the Indian share market. During delivery-based trading, you can buy stocks by making full payment of the same. And, they will be delivered to your Demat account. You can hold the stock in your Demat account for as long as you want but you have to pay the full price of the asset while purchasing it. This is in contrast to intra-day trading where investors do not pay the full price of the stocks they buy and sell on the same day. NRIs are not allowed to conduct intra-day trade in India.
With the relaxation of RBI restrictions, the looming revival of the economy, and the convenience offered by modern technology; this is the best time for NRI’s invest in the high-yield Indian Stock Market. With the expertise of the Green Portfolio team, exponential returns await you even when you put in minimal effort.