All You Need to Know About NRI Trading Accounts

Relocating abroad may be advantageous for some people. An NRI may earn a living in foreign currency while residing and working in some of the world’s most developed countries. Because of the large NRI community that exists around the world, a significant amount is invested in Indian stock.

NRIs must have a trading account to invest in Indian companies listed on the stock exchange. NRI trades are currently permitted exclusively in the F&O segment and for delivery settlement in shares, according to existing legislation. As a result, NRIs are unable to engage in intraday trading, STBT trading, BTST trading, or even short selling. Furthermore, NRIs are now (as per Jun 28, 2017, SEBI circular) permitted to trade in commodities or currency derivatives. This permission for NRIs to trade in derivatives is subject to norms as prescribed under FEMA and mandated by RBI, SEBI, NSE, BSE and other regulatory bodies from time to time.

Indian brokers’ trading services have been made enticing and trustworthy. Despite market instability, the country’s long-term prosperity is attracting many investors.

NRIs are also being courted by Indian stockbrokers with enticing choices such as the Zero AMC NRI Demat Account, the 2-in-1 NRI Trading Account, and the NRI Discount Brokerage Plans. An NRI 2-in-1 account, for example, combines a trading account with an NRI Demat account.

Need for NRI Trading Account in India

Unlike in the United States and many other nations, SEBI in India utilizes a Depository model rather than a Custodian approach. In the latter case, the broker acts directly as the custodian for the clients’ shares and is responsible for their safety. In India, the duty for the safeguarding of the shares is borne by a Depository (either CDSL or NSDL), which is nominated by the broker.

As a result, to trade and invest in shares on secondary markets, one must have an NRI trading account in addition to an NRI Demat account. The Depository maintains a Demat account in which securities are held in dematerialized form. In contrast, a trading account allows the account user to trade listed shares, ETFs, bonds, and other securities.

As a result, an NRI trading account is a form of investment account that allows Non-Resident Indians to trade and invest in mutual funds, ETFs, IPOs, bonds, and direct stocks that are listed on Indian stock exchanges.

This trading account serves as the central point or hub for all stock market transactions involving an NRI bank account, a Demat account, stock exchanges, and the NRI investor. It also allows you to trade stocks and futures and options (F&O) online [but we are strongly opposed to the speculative character of trading in general, and the F&O segment in particular].

NRIs must first open an NRE or NRO savings account with an Indian bank before applying for an NRI Demat account and an NRI trading account (or a 2-in-1 account).

NRI Bank Account

The funds for your trading account must come from a bank account created with an Indian commercial bank. You can open a new account or convert an existing one to an NRI bank account.

It is either an NRE [Non-Resident External or Repatriable] or an NRO [Non-Resident Ordinary or Non-Repatriable] account based on the repatriation of the monies in the account. Both accounts are denominated in INR and do not permit foreign currency transactions.

The difference is that with an NRE account, they can deposit their foreign earnings and withdraw them whenever they choose. In the case of an NRO account, they can deposit revenue earned in India but cannot withdraw funds straight to a foreign country without prior clearance from the RBI.

Why should NRIs have an NRI Demat Account and NRI Trading Accounts?

A Demat account is required to invest in Indian equities. This Demat account can also be used to invest in mutual funds, ETFs, and convertible debentures. One of the depositories maintains the securities in electronic form in the NRI Demat account.

NRIs, as well as PIO (Persons of Indian Origin) and OCI (Overseas Citizens of India) cardholders, are now able to create a Demat account with any SEBI-registered stockbroker. These Demat accounts are commonly referred to as NRI Demat accounts because they are linked to the appropriate NRE or NRO bank accounts.

When it comes to opening an account, transacting with them, and fees, NRI demat accounts are comparable to those held by Resident Indians (RIs). However, there are certain extra requirements for NRE accounts (repatriable) that we shall address momentarily.

A third type of trading account is the Portfolio Investment Scheme, or PIS account, which requires clearance from the RBI through the stockbroker’s banking channel partners.

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