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Portfolio Investment Scheme: Everything You Need to Know

Updated on September 22, 2017 01:25 pm
Portfolio Investment Scheme

By way of a Portfolio Investment Scheme (PIS), you can purchase and sell shares on India’s Primary and Secondary Stock market. Here’s How:

What is the Portfolio Investment Scheme?

The Portfolio Investment Scheme (PIS) was developed by the Reserve Bank of India to help NRIs purchase and sell shares and convertible debentures of Indian companies on a recognized stock exchange. (Convertible debentures are unsecured loans that can be converted back into stock). NRIs use any one of their NRI savings accounts to store, manage, and make transactions from these securities. 

Requirements

  1. You’ll need an NRE Savings Account with your chosen bank for all repatriable, or moveable, transactions, such as securities and cash.
  2. You’ll need an NRE Savings Account with your chosen bank for all non-repatriable, or immoveable, transactions, such as real estate and business ownership.
  3. Submit PIS application form in prescribed format for designating the repatriable and/ or non-repatriable account as a PIS.

7 things you need to know about PIS

  1. Your PIS account should be totally separate from other banks or savings accounts, as well as from other accounts used for shares acquired under other schemes (such as the IPO).
  2. You can open no more than one PIS in one bank.
  3. Repatriable and non-repatriable  transactions need to be stored separately. So, let’s say you choose ICCI Bank for a PIS, you’ll need to open both a repatriable  and a non-repatriable account.
  4. All transactions stored in the PIS need to be exclusively debited from this account, too.
  5. The Reserve Bank of India (RBI) limits your PIS investment amounts. For both repatriation and non-repatriation stocks, you’re only allowed up to 5% of any Indian-based company. If you pool the investment, your group cannot exceed 10% of shares of the invested company, unless the entire body of that invested company agree to sell you more, in which case your max stock can reach 24 per cent. This limit is regularly monitored by the RBI which puts an embargo on your bank account if you exceed that amount.
  6. NRIs cannot use the PIS for day trading or short-selling.
  7. Indians who accumulated stock before they became non-resident Indians can later use the PIS to store these securities. They will need to enter the pre-NRI stocks in a non-repatriable account.

In short

NRIs can purchase and sell shares and convertible debentures of Indian Companies on a recognised stock exchange by routing such transactions through their account with a Designated Bank Branch. The instrument is called the Portfolio Investment Scheme (PIS).

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