Know What is Portfolio Investment Scheme

The Portfolio Investment Scheme (PIS) is a framework established by the Reserve Bank of India (RBI) that allows Non-Resident Indians (NRIs) to invest in Indian stocks and bonds. Here’s a comprehensive guide to understanding PIS, including its key features, benefits, limitations, and the operational aspects.

The Portfolio Investment Scheme (PIS) allows NRIs to buy and sell shares and convertible debentures of Indian companies listed on recognized stock exchanges. This investment is routed through a designated bank branch, as specified under Schedule 3 of the Foreign Exchange Management Act (FEMA) 2000. The PIS facilitates the management of investments in Indian markets by NRIs, providing a regulated and systematic approach to foreign investment.

1. Choosing the Right Account Type:

• Repatriation Basis: To invest on a repatriation basis, NRIs must open a Non-Resident External (NRE) Rupee account. This account allows foreign inward remittances from overseas accounts to be repatriated outside India.

• Non-Repatriation Basis: For non-repatriation investments, NRIs need a Non-Resident Ordinary (NRO) account. This account facilitates remittances from both overseas accounts and local sources but does not allow repatriation of funds.
   

2. Bank Selection:

• Investments must be routed through a designated bank branch with a global presence. The chosen bank should provide PIS services and manage transactions effectively.
   

3. Designated Bank Requirements:

• Only one designated bank can be allocated for PIS transactions, whether for NRE or NRO accounts. This ensures streamlined processing of investments and compliance with RBI regulations.

1. Investment Opportunities:

• Equities and Bonds: NRIs can invest in shares and bonds of companies listed on Indian stock exchanges.

• Futures and Options: Investment in futures and options is possible, but only on a non-repatriation basis and within RBI's regulatory limits.

2. Investment Limits:

• Company-Specific Limits: For repatriation investments, NRIs can invest up to 5% of a company's total paid-up capital. Aggregate NRI investments in a single share cannot exceed 10% of the paid-up capital, though RBI may raise this cap to 24% under special resolutions.

• Conversion of Status: If an NRI becomes a resident Indian, they must hold shares on a non-repatriation basis.

3. Regulatory Compliance:

• Investments must comply with the thresholds and conditions set by the RBI and the Securities and Exchange Board of India (SEBI).

 

1. Restricted Investments:

• Prohibited Sectors: NRIs cannot invest in companies engaged in chit funds, agricultural or plantation activities, real estate (agricultural or farmland), or construction of farmhouses.

2. Account Restrictions:

• Joint Accounts: PIS accounts cannot be opened jointly. Each NRI must have an individual account.

• Intraday Trading and Short Selling: NRIs are prohibited from intraday trading or short selling of shares.

3. Change of Resident Status:

• Account Transition: If an NRI changes their status to a resident Indian, they must close the NRE or NRO account and open a new resident demat account. PIS accounts are not applicable to resident Indians.
   

4. Derivative Contracts:

• Repatriation Limitations: Investments in exchange-traded derivative contracts approved by SEBI cannot avail of repatriation benefits. 

1. Bank Services:

• HDFC Bank: Provides PIS services to its customers, facilitating investments for NRIs. For more details, NRIs can visit their nearest HDFC branch.
   

2. Knowledge Resources:

• NRO vs. NRE Accounts: Understanding the differences between NRO and NRE accounts is crucial for effective investment planning under the PIS framework.
   

By understanding these guidelines and regulations, NRIs can effectively utilize the Portfolio Investment Scheme to invest in the Indian financial market while adhering to legal and regulatory requirements.

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.