What is a Portfolio Investment Scheme?
Non-Resident Indians (NRIs) who want to invest in Indian stocks and bonds can do so through the Reserve Bank of India’s (RBI’s) Portfolio Investment Scheme (PIS).
So What is PIS Account?
According to Schedule 3 of the Foreign Exchange Management Act 2000, NRIs can purchase and sell shares as well as convertible debentures of companies registered in India via a recognised stock exchange, by routing these transactions through their account with a designated bank branch. The PIS portfolio investment scheme has been devised by the RBI to enable NRI’s to do so.
Now, let’s look at some of the details of the PIS Account.
To carry out the purchase and sale of shares through a recognised stock exchange, you will have to set up an account with the designated bank that has a global presence.
The investments can be made either through a repatriation basis or a non-repatriation basis.
For portfolio investment through the repatriation channel, you require a NRE (Non-Resident External) Rupee account for foreign inward remittances from an overseas account.
For portfolio investment on a non-repatriation basis, you require a NRO (Non-Resident Ordinary) account for remittances either from overseas accounts or local resources.
What you can do with PIS:
- You can invest in shares and bonds of companies listed on the stock exchange.
- You can invest in futures or options that are traded only through an accepted stock exchange. You can execute such trades on a non-repatriation basis only, and this is subject to RBI regulatory limits.
- There is a ceiling on the number of particular shares in your portfolio investment. These thresholds are set up by RBI and monitored daily. For example, for investments under repatriation, you can invest only up to 5% of the total paid-up capital of a company. Aggregate investments by NRIs in a specific share should not exceed 10% of the paid-up capital of the company. However, if the RBI passes a special resolution, this cap can be raised to 24%.
- If you are a resident Indian and convert your status to that of an NRI, you can continue to hold the share securities on a non-repatriation basis.
- You can allocate only one designated bank to channel the transactions under the portfolio investment scheme account for NRE and NRO.
What you cannot do under PIS
- You cannot invest in any company that is engaged in the business of chit funds, agricultural or plantation activities, real estate business related to agricultural or farmland, construction of farmhouses, etc.
- You cannot open a portfolio investment scheme as a joint account. According to the RBI policy, NRIs should have a separate bank account only for PIS.
- Investments in exchange-traded derivative contracts that are approved by SEBI from time to time out of rupee funds are not eligible for repatriation benefits.
- You can’t continue to hold an NRE or NRO account if your status shifts to resident Indian. If there is a change, you have to inform the authorised branch and set up a new resident demat account. You cannot continue investing through the portfolio investment scheme account.
Know more about the difference between NRO Account and NRE Account.
- NRIs are not permitted to carry out any intraday trading or short selling of shares.
Most banks provide the PIS facility for foreign portfolio investment for NRIs. HDFC Bank also provides this facility to its customers.
You can also visit your nearest HDFC branch to know more about the portfolio investment scheme account.
You can also download the PIS Account application form through this link.
Looking to open an NRI Account? Click here to get started!
* Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only.