PORTFOLIO INVESTMENT SCHEME

The Portfolio Investment Scheme (PIS) of the Reserve Bank of India (RBI) is a regulatory framework that governs foreign investment in Indian securities markets by non-resident Indians (NRIs) and Persons of Indian Origin (PIOs). The scheme allows NRIs and PIOs to invest in shares and convertible debentures of Indian companies listed on recognized stock exchanges in India. Here's an overview to help you understand the Portfolio Investment Scheme (PIS) of RBI

  • Eligibility The Portfolio Investment Scheme is applicable to Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) who wish to invest in Indian securities markets.
  • Authorized Dealers NRIs and PIOs must open a designated NRE (Non-Resident External) or NRO (Non-Resident Ordinary) bank account with an authorized dealer bank (typically authorized banks licensed by the RBI) to undertake transactions under the Portfolio Investment Scheme.
  • Limits and Reporting Under the Portfolio Investment Scheme, NRIs and PIOs are subject to certain limits on the amount of investment they can make in Indian securities. These limits are prescribed by the RBI and are subject to periodic review. NRIs and PIOs are required to adhere to reporting requirements specified by the RBI regarding their investments and transactions in Indian securities.
  • Types of Investments NRIs and PIOs can invest in shares (equity) and convertible debentures of Indian companies listed on recognized stock exchanges in India under the Portfolio Investment Scheme. However, certain categories of securities may be restricted or prohibited for investment by NRIs and PIOs under the scheme.
  • Repatriability Investments made by NRIs and PIOs under the Portfolio Investment Scheme are generally allowed to be repatriated (converted into foreign currency) subject to certain conditions and limits specified by the RBI. Repatriation of funds is typically allowed for the sale proceeds of securities held under the scheme, subject to payment of applicable taxes and compliance with regulatory requirements.
  • Designated Depository Participants (DPs) NRIs and PIOs are required to appoint a designated Depository Participant (DP) registered with the Securities and Exchange Board of India (SEBI) for holding and maintaining their securities in dematerialized (electronic) form under the Portfolio Investment Scheme.
  • Taxation NRIs and PIOs investing in Indian securities markets under the Portfolio Investment Scheme are subject to taxation laws and regulations applicable to non-residents. Tax implications may vary depending on factors such as the type of investment, duration of holding, and applicable tax treaties between India and the country of residence of the investor.
  • Regulatory Compliance NRIs and PIOs are required to comply with the provisions of the Foreign Exchange Management Act (FEMA) and regulations issued by the Reserve Bank of India (RBI) regarding foreign investment in Indian securities markets under the Portfolio Investment Scheme. Non-compliance with regulatory requirements may result in penalties or restrictions imposed by the RBI.

The Portfolio Investment Scheme (PIS) of RBI aims to facilitate foreign investment by NRIs and PIOs in Indian securities markets while ensuring transparency, compliance with regulatory requirements, and protection of investor interests. NRIs and PIOs considering investments in Indian securities markets under the scheme should carefully review the eligibility criteria, limits, reporting requirements, and regulatory framework governing such investments. It's advisable to seek professional advice from financial advisors or legal experts familiar with the regulations governing foreign investment in India.

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