Guidelines For NRI Trading In India

A non-resident Indian is a person of Indian origin who has migrated to another country. It could also be someone who is of Indian origin but born in another country or a permanent resident outside India. The term usually refers to NRI financial situation of a person.

It is quite evident that India is set to become an economic superpower in the years to come. And the Indian share market is becoming a hot destination for foreign investment because of its liberal economic policies, ever growing GDP and relatively less competition.

NRI investment was a step taken by the Indian government in order to help stabilize the economy and to encourage foreign investment in India. The Foreign Exchange Management Act , 1999 provided the rules for NRI’s to be eligible to invest in India.

The rules state that a person resident outside India or those who took jobs outside the country is eligible to invest. People who have an Indian passport if it is not a citizen of Pakistan or Bangladesh can also be placed. People whose parents or grandparents were citizens of the country are also eligible to invest in India.

NRI’s have been permitted to hold bank accounts in Indian banks for a while now but are now permitted to make investments in shares and securities. NRIs are permitted to make direct investments in proprietary/partnership concerns in India as also in shares/debentures of Indian companies. They are also permitted to make portfolio investments i.e. purchase of shares/debentures of Indian companies through stock exchanges in India.

However there are a number of guidelines for NRI’s that wish to make investments. An NRI is only allowed to deal with one bank at any point of time. They can only trade in delivery-based transactions as Intra-day trading is not allowed for NRI’s. Buy today sell Tomorrow (BTST) which is provided by a number of Indian Investment vehicles is not permitted for NRI’s.

NRI’s are also required to have 100%of the funds at the time of buying of shares. In the same way they are required to have 100% of stock available while selling. Short selling is not permitted. They are also required to make bill-to-bill payments and no adjustments of purchase against sale are allowed.

All NRI Accounts are controlled by both Securities and Exchanges Board of India (SEBI) and Reserve Bank of India (RBI). Very serious action is taken against violations of the regulations.

Online Trading has made it easier for NRI’s to trade in the Indian Market as almost all of the registered brokers offer these facilities. In order for a non resident to trade online he/she must have /open a bank account with a Portfolio Investment Scheme (PIS). They must also open a demat account as well as a broking account with a broker.

The profession of being a Share Trading India has fast picked up pace in the past few years. Learn all about the trading world of Shares and get acquainted with the Finance world.