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Demat Process
1. Who is a Non-Resident Indian (NRI)?
Non Resident Indians fall under the following broad categories:
- Indian citizens who stay abroad for employment or for carrying on
a business or vocation or for any other purpose in circumstances indicating an indefinite
period of stay outside India.
- Indian citizens working abroad on assignments with foreign
Governments/government agencies or International/Regional Agencies like the UNO, IMF,
World Bank, etc.
- Officials of the Central and State Governments and Public Sector
Undertakings deputed abroad on temporary assignments or posted to their offices (including
Indian Diplomatic Missions) abroad.
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2. I am a NRI, what are the steps I need
to follow to start investing in the Indian stock market?
- Open a bank account with RBI (Reserve Bank of India) approved
designated bank branch.
- Take approval of RBI for investment in Indian Stock Market
- Open a Demat Account with a Depository Participant
- Appoint a broker to execute trades on your behalf on the Exchange
Open a bank account with RBI(Reserve Bank Of India) approved designated bank branch.
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3. What is a designated branch of a Bank?
RBI has authorised a few branches of each bank to conduct the
business under Portfolio Investment Scheme on behalf of NRIs/OCBs. These branches are the
main branches of major commercial banks located close to the stock exchange/s. NRIs/OCBs
will have to route their applications through any of the designated bank branches that
have authorisation from RBI.
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4. How can a NRI open a bank account?
Banks holding authorised dealers' licenses or banks specifically
authorised in this behalf by Reserve bank can maintain accounts in the names of NRIs. Thus
you can open an account with any bank, which is
authorised by RBI, to start investing in India.
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5. What is the permission, which a NRI has
to obtain from RBI to invest in India?
NRI's are allowed to invest in Indian equity markets under the
Portfolio Investment Scheme. Under this scheme NRIs/OCBs are permitted to invest in
shares/debentures of Indian companies through Stock Exchanges in India. These investments
require prior approval of RBI, which is valid for a period of five years and can be
renewed upon written request.
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6. How do I get the necessary approvals
from RBI for Portfolio Investment scheme?
The application is to be submitted to RBI through a designated branch of a bank in
India in one of the prescribed forms, i.e. NRC/NRI/RPC/RPI. RBI issues general permission
for a period of 5 years, which can be renewed further by the concerned authorised dealer,
for a further period of 5 years.
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7. How do I open a depository account?
You can open an account with one of the depository participants.
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8. What are the limits for investment in
Indian Stock Market?
There is an overall ceiling of 10% of paid-up equity share capital of the
company/paid-up value of each series of convertible debentures for purchase by NRIs/OCBs.
The overall ceiling can be raised to 30% if the company concerned passes a special
resolution to that effect in its general body meeting and a Board resolution.
Individually, NRIs/OCBs can make investment upto 5% of the paid-up equity share
capital/each series of convertible debentures. However, there is no ceiling for investment
in domestic Mutual Funds.
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9. What are the types of Rupee accounts
permitted to be maintained?
Two. Non-Resident (External) Rupee Accounts (NRE Accounts) and Ordinary Non-Resident
Rupee Accounts (NRO Accounts).
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10. What is the distinction between NRE
and NRO accounts?
Funds remitted from abroad or local funds which can otherwise be remitted abroad to the
account holder, can be credited to NRE Accounts. Local funds, which do not qualify for
remittance outside India, are required to be credited to NRO accounts.
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11. What is a Demat Account?
In the advanced countries, depository systems and services have played a significant
role in not only facilitating smooth trading and settlement but also attracting foreign
investment in the capital market.
The depository system evolved by the National Securities Depositories Limited (NSDL)
enables investors to overcome all problems related to handling physical certificates. NSDL
is an organisation formed to provide electronic depository facilities for securities
traded. The securities of investors are held in electronic form through the medium of
Depository Participants.
The depository concept is similar to the Banking system with the exception that banks
handle funds whereas a depository handles securities of the investors. A depository can
therefore be conceived of as a "Bank" for securities. An investor wishing to
utilise the services offered by a depository has to open an account with the depository
through the Depository Participant. This is very similar to opening an account with any of
the branches of a bank in order to utilise the services of that bank.
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12. What is a Depository? Who is a
Depository Participant?
A depository holds the securities of investors in electronic form just like a bank
holds cash of its customers. As in a Bank, investors can deposit/withdraw and transfer
securities. The National Securities Depository Limited (NSDL) is the first depository in
India. The functions of NSDL are regulated by the Securities and Exchange Board of India
(SEBI).
The Depository Participants (DPs) are the link between the Shareholder, the Company and
NSDL. Banks, Financial Institutions, Custodians, Stock Brokers etc. can become DPs subject
to their meeting certain requirements prescribed by NSDL and SEBI. NSDL publishes from
time to time the list of DPs registered with them.
You can open your accounts with one or more DPs, as you like. The procedure for opening
an account with the Depository Participant is similar to opening a Savings Bank Account
with the Bank. After opening the account, you can hold shares of any number of companies
in your account, provided all such companies have entered the depository system.
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