Which asset class to invest in?

  1. Small Savings Schemes:
    NRIs are not permitted to invest in bearer securities like Indira Vikas Patra / Kisan Vikas Patra. NRIs were earlier allowed to make investments in National Savings Certificates subject to the terms and conditions applicable to the sale/ issue of such certificates; however, now investments in NSC by NRI have been barred. NRIs are not allowed to make any fresh investments in Public Provident Fund. Investment already made, if any, shall persist. NRIs are not allowed to invest in the ongoing series of RBI Bonds. NRIs who are senior citizens shall not be allowed to invest in the recently introduced Senior Citizen Savings Scheme 2004.
  2. Government securities / Units of Unit Trust of India:
    NRIs are permitted to invest in Government securities through primary dealers. They are also permitted to invest in units of UTI, either through authorized dealers or directly from the Unit Trust of India. These investments are freely transferrable and saleable through authorised dealers or upon repurchase by UTI. The maturity proceeds can be repatriated, provided these are purchased out of funds remitted from abroad or from NRE/FCNR accounts.
  3. Bonds, Company Deposits and Commercial Papers:
    NRIs are permitted to purchase non-convertible debentures of Indian Companies. They may also place their funds in Fixed Deposits with Public Limited Companies. NRIs are also allowed to invest in commercial papers issued by Indian companies on non repatriable basis. These are non transferable and are required to be held till maturity. NRIs can invest in bonds issued by Public Sector Units (PSU’s) from NRE account on repatriable basis.
  4. Shares / Convertible Debentures of Indian companies:
    NRIs can make investments in shares and convertible debentures of Indian Companies both on repatriation and non repatriation basis. This is provided the company is not involved in plantation, real estate or agricultural business. NRIs can make investments both in the primary as well as secondary market.
  5. Portfolio Investment Scheme (PIS):
    NRIs are allowed to invest in shares or debentures of Indian companies and mutual fund units through the stock exchanges in India, both on repatriation and non repatriation basis. These purchases can be made only through the designated branch of an authorised dealer. The NRI can select only one such designated branch for the purpose of investments through PIS. Although not necessary, it is advisable to maintain a bank account with the designated branch for administrative convenience.
  6. There are ceilings for investments made by NRI/OCB/PIO/FII in shares of Indian companies. Individually, the above entities may invest up to 5% of the total paid up capital (equity + preference) of the company. This limit shall include investment under PIS, both on repatriable as well as non repatriable basis. Besides the individual limit, there is an overall limit up to 10% of the paid up capital of the company, which can be increased to 24% by passing a special resolution in a shareholders’ meeting. Investments made through IPOs are excluded for the purpose the limits mentioned above.
  7. Mutual Funds:
    NRIs are permitted to invest in mutual funds both on repatriable as well as non repatriable basis. However, investments in Money Market Mutual Funds can be made only on non repatriable basis. There is no limit for investment in domestic mutual funds.
  8. Real Estate:
    General permission is available to a NRI, being an Indian Citizen, to invest in immovable property in India, provided funds are if from outside India or through NRE/ FCNR accounts.
    NRIs / PIOs can freely rent out their immovable properties, without seeking any permission from RBI.

They are permitted to transfer the immovable property to any person resident in India, NRI or PIO. The sale proceeds are allowed to be repatriated if the property is acquired as per applicable exchange control laws and the amount does not exceed the following:

In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

  1. The amount paid for acquisition of the immovable property in foreign exchange or
  2. The foreign currency equivalent of the amount paid where the payment is made from funds held in NRE account for acquisition of the property

Admin- Rajen Gala

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