Can NRIs invest in Mutual Funds in India? Do they require any special permission from the RBI?
Non Resident Indians and (NRI) Persons of Indian Origin (PIO) residing abroad (NRIs) / Foreign Institutional Investors (FIIs) have been granted a general permission by Reserve Bank of India Schedule 5 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 for investing in / redeeming units of the mutual funds subject to conditions set out in the aforesaid regulations. Investments by NRIs in Mutual Funds can be made on a repatriable or on a non-repatriable basis, as preferred by the investor
Repatriable Basis
To invest on a repatriable basis, you must have an NRE or FCNR Bank Account in India. The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on repatriation basis, subject to the following conditions:
[1] The mutual fund should comply with the terms and conditions stipulated by SEBI.
[2] The amount representing investment should be received by inward remittance through normal banking channels, or by debit to an NRE / FCNR account of the non-resident investor.
[3] The net amount representing the dividend / interest and maturity proceeds of units may be remitted through normal banking channels or credited to NRE / FCNR account of the investor, as desired by him subject to payment of applicable tax.
Non-Repatriable Basis
The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on non-repatriation basis, subject to the condition that funds for investment should be provided by debit to NRO account of the NRI investor.
No permission of Reserve Bank either by the Mutual Fund or the NRI investor is necessary. Only Overseas Corporate Bodies (OCBs) and FIIs require prior approvals before investing in Mutual Funds.
Who is a Non Resident Indian (NRI)?
Who is a Foreign Institutional Investor (FII)?
An FII means an institution established or incorporated outside India which proposes to make investment in Indian securities, and is registered with SEBI.
Who is a Person of India Origin (PIO)?
A Person of Indian Origin means a citizen of any country (other than Bangladesh or Pakistan), if:
-
[1] He at any time held an Indian passport; or
[2] He or either of his parents or grandparents was a citizen of India; or
[3] He is a spouse of an Indian citizen, or of a person referred to in (a) or (b) above.
Can an NRI maintain a bank account in India?
Yes. NRIs can maintain accounts in rupees as well as in foreign currency. Accounts in foreign currencies can, however be maintained with authorized dealers only
What are the different types of rupee accounts permitted to be maintained?
Four types of rupee accounts viz.
-
[1] NRE: Non-resident (External) Rupee Accounts ,
[2] NRO: Non-resident Rupee (Ordinary) Accounts
[3] NRSR: Non-Resident (Special) Rupee (NRSR) Account, and
[4] NRNR: Non-resident (Non-repatriable) Rupee deposit accounts (NRNR) are permitted to be maintained by NRIs
What are NRE and NRO accounts?
-
[1] Non-Resident (External) Rupee (NRE) account is a Rupee account from which funds are freely repatriable. It can be opened with either funds remitted from abroad or local funds which can be remitted abroad.
[2] Non-Resident Ordinary Rupee (NRO) account is a Rupee account and can be opened with funds either remitted from abroad or generated in India. The amounts in such account are generally non repatriable. However, funds in NRO accounts can be repatriated subject to /a s per per various directives in force at the time of repatriation. More details can be found on RBI website – www.rbi.org.in
Who are QA 22 Account holders? Can they invest in Mutual Funds?
These are NRI investors for which we normally have resident rupee accounts – QA22.
QA22 accounts are for non-resident or overseas corporate who want to establish a branch / liaison / export office in India for which an RBI approval is required.
After the introduction of FEMA, QA22 accounts are being treated at par with normal resident accounts, though RBI approval is still required for setting up the branch / liaison/ export office.
What is the distinction among NRE, NRO and NRSR Accounts?
Balances held in NRE accounts can be repatriated abroad freely, whereas funds in NRSR and NRO account cannot be remitted abroad but have to be used only for local payments in rupees. Consequently, funds remitted from abroad or local funds which can otherwise be remitted abroad to the account holder can only be credited to NRE accounts. Funds due to the non-resident account holder which do not qualify, under the Exchange Control regulations, for remittance outside India are required to be credited to NRO accounts.
The account holder can freely transfer funds from NRO/NRE/FCNR accounts to NRSR account but transfer of funds from NRSR account to other accounts of NRI is not permissible irrespective of the source of funds.
However funds in NRO accounts can be repatriated subject to / as per various directives in force at the time of repatriation. More details can be found on RBI website, www.rbi.org.in
Snapshot
| Type of account Currency | Currency | Repatriable / Non Repatriable |
| NRE – Non Resident External | INR | Freely Repatriable |
| NRO – Non Resident Ordinary | INR | Non Repatriable, repatriable subject to RBI conditions |
| NRSR – Non Resident Special Rupee | INR | Non Repatriable |
After the introduction of FEMA, QA22 accounts are being treated at par with normal resident accounts, though RBI approval is still required for setting up the branch / liaison/ export office.
What is a PIO Card? Who Issues PIO Cards? How to get a PIO Card?
PIO Cards are issued by Ministry of External Affairs (CPV Division), Government of India to persons of Indian origin through Indian missions abroad. Specific information on rules, forms, particular offices, missions is available on the website – http://passportindia.gov.in/