What is a Portfolio Investment Scheme

The world of finance offers numerous avenues to investors seeking to diversify their holdings and grow their wealth. One such pathway that has gained traction among Non-Resident Indians (NRIs) is the "Portfolio Investment Scheme" or PIS. This scheme facilitates NRIs to dive into the Indian securities market, allowing them to invest in stocks and bonds. To navigate through this channel, NRIs require an NRE (Non-Resident External) account, particularly if they wish to invest with repatriation benefits. An ideal choice for many NRIs is NRE Savings accounts by IDFC FIRST Bank, granting them the flexibility to transfer funds 24/7 without any additional charges.

What is PIS, and what can NRIs do with it?
 

We can trace the inception of PIS back to the guidelines set forth in the Foreign Exchange Management Act (FEMA) of 2000. According to Schedule 3 of FEMA 2000, NRIs are allowed to buy and sell shares as well as convertible debentures of Indian companies on a recognized stock exchange by routing these transactions via their account with a designated bank branch. This provision means that NRIs do not have to be physically present in India to invest in the Indian stock market. They can do so through the framework established by FEMA, which mandates the routing of transactions through specific designated bank branches. Here are some options that are NRIs are open towards:

First explain NRI investment through NRE PIS is required for NRO investment through NRO settlement.

1. NRIs can invest in shares or bonds
 

PIS primarily allows NRIs to purchase and sell shares or convertible debentures of Indian companies on recognized stock exchanges. Leveraging a bank like IDFC FIRST Bank ensures smooth transactions, allowing for a seamless investing experience. When we write Bonds it depends on company to company where NRE or NRO is allowed or not

2. NRIs can invest in futures or options (FnO is allowed only through NRO account where broker gets CP code through a custody) settlement for such FnO transactions are settled by Broker with customer directly
 

Beyond simple shares or bonds, NRIs can venture into futures and options through the PIS.(this is a incorrect statement) IDFC FIRST Bank's infrastructure offers a reliable platform for executing these more advanced trading strategies.

3. NRIs can invest in a limited number of shares
 

While the PIS opens doors to the Indian securities market, it also has certain limitations. NRIs are subject to a ceiling limit on their investments. For instance, NRIs' investments cannot exceed 5%(% vary from company to company) of the paid-up capital of the company or 5%(% vary from company to company)  of the total paid-up value of each series of convertible debentures.

4. Indians-turned-NRIs can continue to hold the share securities on a non-repatriation basis
 

Individuals who have shifted abroad and attained NRI status can retain their holdings in Indian companies. However, these investments will be on a non-repatriation basis(NRO). Therefore, NRIs cannot transfer the funds  overseas through 1 M scheme.

5. NRIs can allocate only one designated bank
 

While having multiple banking relationships is common, under the PIS, an NRI can only designate a single bank for their investment transactions.i.e. customer can have only NRE PIS account and its permission only with One Bank at a time. In case a customer wishes to transfer PIS from One Bank to another, customer has to obtain No Objection confirmation letter and holding details from previous PIS bank and to be submitted to the Designated Bank. Partnering with a bank like IDFC FIRST Bank ensures that this exclusive relationship is optimized with robust features and superior customer service.

With IDFC FIRST Bank you get exclusive Industry First benefits at your fingertips:

1) Open Online PIS account in 1 click through Mobile App

2) Access PIS account through Net banking/Mobile app

• PIS holding report
• Capital Gain/loss statement
• Update Holdings
• Change Broker

In addition to above with PIS account following features make your account like no other:

1)  Zero PIS account opening charges

2) Zero PIS issuance charges

3) No minimum AMB (earn interest as per Savings slab for any balance mainitained)

4) NO AMC for FIRST Year

Restrictions of a Portfolio Investment Scheme
 

Investors must adhere to various restrictions after signing up for the Portfolio Investment Scheme. Read this section to know more about these restrictions.

1. PIS restricts NRIs from investing in certain companies
 

NRIs cannot invest in any company that is engaged in the business of chit funds, agricultural or plantation activities. Follow above PIS comes with sectoral restrictions. NRIs are prohibited from investing in specific sectors, ensuring the funds are directed towards more stable and established industries.

2. NRIs cannot open a portfolio investment scheme as a joint account
 

 PIS account and Permission is issued pan basis wise hence it can be issued only in the single name while customer can open Demat in Joint name.

3. Certain investments are not eligible for repatriation benefits
 

Even if an NRI invests in SEBI-approved derivative contracts, the returns or funds from these investments are restricted from being transferred back to their home country.

4. NRIs cannot hold an NRE or NRO account if their status shifts to resident Indian
 

Changing residential statuses come with implications. If an NRI returns to India and becomes a resident, they are required to close or modify their NRE or NRO accounts accordingly.

The Portfolio Investment Scheme stands as a significant bridge connecting Non-Resident Indians to the vast investment opportunities in India's stock and bond market. While it offers a plethora of benefits and potential growth, it's essential to understand the limitations and restrictions accompanying it. By aligning with trusted banking partners like IDFC FIRST Bank and ensuring a thorough understanding of the scheme's nuances, NRIs can navigate the Indian securities market with confidence and clarity.


 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.