NRI Demat Account Opening Process

The Indian equity market is one of the fastest-growing in the world. In recent times, Foreign Institutional Investors (FIIs) have played a very important role in driving up the Indian market. Not only Indian investors but Non-Resident Indians (NRIs) are also getting involved in the ever-expanding Indian equity market. To trade in the Indian capital market, any investor, whether Indian or NRI, needs to open two types of accounts - Demat and Trading. Prominent Indian brokerage houses, such as 5paisa,  make the process of opening these accounts super-easy. So you might be thinking, what is a Demat and Trading account, and how can you find the best Demat and Trading account for NRIs? In this article, we will explain all the answers related to the NRI Demat account in detail. 

What is an NRI Demat Account?

An NRI Demat or Dematerialized account is an online storage facility for electronically storing investors’ shares. CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited) are depository institutions that maintain investors’ Demat accounts in India. While NSDL stores shares traded on the NSE, CDSL stores shares traded on the BSE. The Demat account number is a sixteen-digit  unique number that provides access to a wide range of financial products. Each time you buy or sell shares through your trading account, your Demat account gets credited or debited. However, it takes two (2) business days for the shares to get credited or debited.

Who is an NRI?

Before applying for an NRI Demat account, you must know who qualifies as an NRI. An NRI, according to the Foreign Exchange Management Act of 1999, is an Indian or Indian-origin citizen living in a foreign country for business, employment, or other purposes. NRI also refers to any Indian citizen who has stayed in India for less than 182 days in a financial year. Hence, you can open an NRI Demat account if you belong to either of the two categories of individuals mentioned above.

What is the NRI Demat Account Opening Process?

An NRI can open two types of Demat accounts.

1. Non-Resident External (NRE) Demat Account

An NRE Demat account is designed for Non-Resident Indians (NRIs) and allows NRIs to trade in Indian stocks, bonds, and mutual funds. To use this account, investments must be routed through the Portfolio Investment NRI Scheme (PINS). However, it's important to note that the NRE Demat account is primarily for stock market investments.

One of the key advantages of the NRE Demat account is that both the investment amount and any profits earned are fully repatriable, meaning they can be transferred to the NRI's bank account in their country of residence. To have a repatriable Demat account, NRIs must link it to a Non-Resident External (NRE) bank account.

Types of Demat Accounts in India

Here's the process for using a repatriable Demat account: 

1. As an NRI, you need to close the existing Demat account that you held as a resident Indian.
2. After closing the resident Demat account, you can transfer your shares to a Non-Resident Ordinary (NRO) account.
3. Keep in mind that there's a limitation on selling shares, allowing you to transfer a maximum of $1 million per calendar year from your NRO account to your overseas accounts.

2. Non resident ordinary (NRO) Demat Account

An NRO Demat account is a non-repatriable account, that allows NRI investors to trade and invest in equity stocks, futures, options, bonds, and mutual funds. With an NRO Demat account, you are not required to invest through the PINS route. Additionally, you can repatriate up to US$1 million every financial year. It's important to note that only the principal investment amount is repatriable in an NRO account, not the interest.

1. After you have figured out the type of Demat account you want to open, you need to follow the steps mentioned below to open an NRI Demat account:
2. Before opening an NRI Demat and Trading account, it's essential to ensure that you have the necessary documents in order. The most crucial documents required include a PAN card, NRI bank account details, and a Portfolio Investment Scheme (PIS) permission letter issued by the Reserve Bank of India.
3. Ensure that your documents are verified either by the Indian Embassy in your country of residence or by a competent authority in accordance with SEBI's regulations.
4. Visit the website of the stockbroker that offers the best Demat account for NRIs. 5paisa provides a free Demat account opening facility for all eligible NRI investors.
5. Click on the 'Open a Demat Account' tab. To open a free Demat account.
6. Now, enter the required information and upload scanned copies of the documents mentioned in point no. 1.
7. After submitting the documents, 5paisa will process your application and send you a welcome mail containing your Demat account number on approval.