To invest in the stock markets in India, you must have a Demat Account. You should have a Demat account, whether you are a resident Indian or a non-resident Indian (NRI) to invest in stocks, IPOs, mutual funds, bonds, and NCDs, among other things.
It should be noted that an NRI is a person who is of Indian origin or by birth but is residing outside of India. The FEMA regulations apply to all NRI transactions.
A Demat Account is an online account used to store electronic securities. It is similar to a bank account, but instead of money, it holds stocks, mutual funds, exchange-traded funds (ETFs), NCDs, and bonds. It facilitates and secures online trading and investment.
NRI Demat Account
The Indian stock market is one of the most appealing destinations for investors from all over the world. Any NRI (including PIO and OCI) seeking to build wealth through stock and mutual fund investments in India cannot afford to ignore the Indian stock markets.
The first step in investing in stocks, mutual funds, IPOs, and other securities in India is to open an NRI Demat account.
The NRI Demat Account is similar to the resident Indian Demat Account. It is opened and operated similarly to a resident Indian account. Even the NRI Demat Account fees are the same as those charged for a resident Indian Demat account. The only difference is that when opening a Demat account, a customer must specify whether they are a resident Indian or an NRI.
NRI Demat Account Key Facts
- A Demat account is the most secure way to store securities for the long term.
- Any Depository Participant can open an NRI Demat Account (DP). The majority of stockbrokers and large banks are also DPs.
- To open a Demat account, an NRI does not need permission from the RBI or SEBI.
- An NRI Demat account can be opened, as either a single or joint holder.
- Nomination is available for NRI Demat accounts.
- For direct deposit of dividends, the NRI Demat Account must be linked to the NRI bank account (NRE or NRO).
- The customer must provide the stockbroker with a signed Power of Attorney (PoA). This PoA authorises the broker to withdraw shares from the customer’s Demat account when the customer sells them.
- NRIs can invest in Indian company stocks and securities, as well as government securities.
- In the absence of the NRI, an Indian Power-of-Attorney holder cannot open or operate the NRI Demat account. The individual cannot also make payments outside of India on behalf of the NRI.
How the NRI Demat Account Works?
An NRI who wishes to invest in the Indian stock market must understand and adhere to the following procedures:
Existing Demat Account Termination
Drop the plan to invest in the Indian equity market using the same Demat account you used when you were a resident of the country. An NRI must close their existing Demat account, which was opened before obtaining NRI status. Your Demat account, which contains shares purchased while you were a resident, must be transferred to an NRO (Non-Resident Ordinary) Demat account.
When it comes to investing in the securities market, the Reserve Bank of India places restrictions on NRIs. You cannot purchase or trade equities from the secondary market in your existing Demat account, according to RBI rules. Furthermore, NRIs are not permitted to invest more than 5% of an Indian company’s paid-up capital. This is why after obtaining NRI status, an NRI must close their existing Demat account and open a new one.
To build exceptional wealth from the Indian equity market, you must be obsessive about even the smallest details of the NRI Demat account. As a result, pay closer attention to these details to avoid future problems. A well-crafted financial plan will also be of great assistance in becoming a successful long-term investor. I strongly advise you to use our services to develop a solid financial plan. You can also visit Choice India’s official website to know more about it.