Best investment options for NRI’s in India now

Best investment options for NRI’s in India now, NRI investments in India, NRI investment opportunities in IndiaBest investment options for NRI’s in India now

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In the last few years, there is huge increase in investment opportunities for NRIs and Persons of India origin (PIO). Government of India has simplified rules and regulations applicable for NRI’s and encouraging them to invest in India.  NRI’s are showing greater interest in investing in India. What are the investment options for NRI’s in India now ? What are rules and regulations applicable for them ?

Investment options for NRI’s in India now

Before we jump in to investment options available, we need to know that an NRI can invest his money in India through two routes. One is “automatic route” where no approvals from Govt are required and another is “Government route” where an NRI need to take approvals from Govt. of India before making any such investment.

Also NRI investment opportunities would also specify whether it is repatriation (amount can be transferred to origin) or not repatriation.  

1) Investment in company shares and debentures: NRI’s can invest in shares and non convertible debentures of Indian companies through Portfolio Investment Scheme (PIS). PIS is a scheme of RBI. Once NRI opens this PIS account, he can buy or sell shares and debentures of Indian companies at designated stock exchanges. Currently there are various banks which are offering PIS accounts like ICICI Bank etc. However these investments have to be carried out as per FEMA guidelines. You need not apply for any fresh PAN card. Your existing PAN card would be sufficient to run the transactions of mutual funds or shares.

  • The securities in which NRI can invest through automatic route includes agricultural sector, mining, power, industrial explosives, hazardous chemicals, pharmaceuticals, transportation, insurance, non banking financial institutions etc. No RBI approvals are required to invest in these securities.
  • In some cases, the approval of FIPB (Foreign Investment Promotion Board) may be required. These include sectors like tea, infrastructure companies except telecom, media, courier services and single brand product retailing.
  • Investment by NRI is prohibited in sectors like Retail, atomic energy, chit fund companies, nidhi companies, lottery and gambling, tobacco and other sectors which are not opened to private sector investment. Investment by NRI is prohibited in sectors like Retail, atomic energy, chit fund companies, nidhi companies, lottery and gambling, tobacco and other sectors which are not opened to private sector investment.
  • You can look at best stocks to buy in India for 2013 to grow your investment in equity markets (Excluding the sectors prohibited for NRI’s).

2) Investment in mutual funds: Investment in mutual funds can be done by NRI’s only through NRI/NRO/FCNR account or through “inward remittance”. If you are looking for repatriation benefits, you should invest for at least 3 years period. However these investments have to be carried out as per FEMA guidelines. NRI’s can invest in top diversified mutual funds to benefit.

3) Investment in bank fixed deposits: NRI’s can deposit in bank fixed deposits at least for 3 year period if you are looking for repatriation benefits. However banks allow such deposits to be opened through FCNRB (Foreign currency Non-Resident Bank account). These accounts are maintained in US dollars, Pounds sterling etc. The funds in this account can be repatriated. Below are the best interest rates available currently for NRI’s.

  • Development credit bank – 9.25% p.a.
  • ING Vysya bank                – 9.75% p.a.
  • OBC                                – 9.10% p.a.
  • Canara Bank                    – 9.05% p.a.
  • Deutsche Bank                 – 9.00% p.a.
  • SBH                                 – 8.75% p.a.
  • Kotak Bank                      – 8.75% p.a.

4) Investment in real estate: NRI’s can invest in residential and commercial properties without any approvals. However they cannot invest in agricultural lands or plantations.

5) Investment in Post office schemes: NRI’s CANNOT invest in any of the Indian post office schemes directly. However, they can open a joint account with a second person who is living in India and they can invest in a few post office schemes.

6) Investment in Bonds / Government securities: Investment in government securities or bonds is freely permitted to NRI’s.  Such investment should be done for at least 3 years period. If such investments are purchased from NRE/FCNR account, the maturity proceeds can be repatriated. If purchased from NRO account, the maturity is credited to NRO account only and cannot be repatriated.

7) Investment in proprietary/partnership firms: NRI’s are permitted to make direct investment in proprietary concerns and partnership firms. However income through these cannot be repatriated outside India.

Conclusion: Though there are various investment options for NRI’s. However they may not be suitable for every NRI. Choose the best options suitable for you to maximize your returns.

Readers, I would like your comments and feedback on this article.

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Suresh
Best investment options for NRI’s in India now

Note: Since the NRI investments are subject to foreign exchange rules and regulations and some of them fall under purview of FEMA guidelines, NRI’s are adviced to take help from professionals who are well versed with these guidelines. Though your investment options may not change, you need to be clear about the formalities to be taken care before you invest in India. Happy investing NRI's :-)

 

Article by Suresh

Suresh KP i.e. me have written 500+ articles on this blog. I love doing analysis and identifying the Best investment options.

67 Comments

  1. mahesh says:

    Hi am nri i want to invest in company fds almost 50lakhs wether i have to pay income tax, and i want to invest in non cumulative schemes which i get returns monthly or querterly for long time investment, and returns which i get earn i want to reinvest 80% . Am very much intrested in tamil nadu power and tamilnadu transport corporation sriram jp assosates.kindly advice….

  2. sampath says:

    Hi
    I am a overseas citizen of India (OCI) in Australia.
    I read through the information on the type of markets. Although it mentions about sectors that I could possibly invest, not sure if OCI can invest in here. Is OCI treated same as PIO?

    Am I allowed to invest in Indian stock market?

    If possible what are the possible channels through which I could invest- ICICI / Axis bank / through RBI?
    Could you please point to the right documentation that is required to start the process?
    Thanks
    sampath

    • Suresh KP says:

      You would fall under NRI category and you can very much invest in Indian stock market. You can approach ICICIdirect.com or fundsindia.com or any other stock broker, you can help you to open demat / mutual fund account

  3. saurav says:

    Hello,

    I am an NRI and i want to invest in indian stock markets. So can i use my parents demat/trading account for investing in stock ? This way i don't have to pay high brokerage that are levied on NRIs by the brokerage firms as i have talked with icici and they told brokerage is 1.24% which is very high compared to my parent's brokerage which is around 0.4%.

  4. nikhil says:

    I am already investing in the stock market with Sharekhan demat AC and having stocks for long term perspective and want to hold all them. but I am going to US. can I continue my current holding or what steps I need to do?
    thanks Sir.

    • Suresh KP says:

      Nothing. You can just leave it in demat account

      • nikhil says:

        Thanks Sir for your reply.
        Can I add more stocks to my existing demate account online via my NRE or NRO A/c connected to demate AC or I will need to look for other low returns investment options like FD and RD. Also for mutual funds the existing connected SBI AC need to be converted to NRO or NRE to keep on investing by savings of US salary.

  5. manjeet says:

    How can NRI buy bonds in India?

    • Suresh KP says:

      Manjeet, Are you taking about Tax free bonds ? If yes, you can buy when they open for subscription (keep reading our blog which publishes as and when a tax free bond opens) or thru stock market directly. If your question is Non convertible debenture bonds, then it depends on company to company and check whether you are eligible for subscripition.

  6. manjeet says:

    Can NRI's buy Tax free bonds?

    • Suresh KP says:

      Manjeet, It depends on the company which is offering. Majority of them are offering tax free bonds where NRI’s too can invest

      • manjeet says:

        Thanks, Suresh. How can I buy tax free bonds in secondary market? I live in Canada and have significant amount in my HDFC NRO account that I would like to invest in tax free bonds.

        • Suresh KP says:

          You need to have demat account. Visit “tax free bonds” section and you can purchase them during stock market hours.

          • manjeet says:

            Suresh, HDFCSecurities tells me that residents of USA and Canda are not allowed to open trading account in India. If that's the case, how can US and Canada NRI's participate in India's secondary market?

          • Suresh KP says:

            Manjeet, Lools there is confusion. Residents of USA/Canada are not eligible, however “NRI’s are eligible. Pls get this clarification. 

  7. alagappan says:

    i am pio i need to invest 1 crore rupees which is the best option please advice

    • Suresh says:

      Alagappan, There are several investment options available. It depends on your risk appetite. If you are low risk appetite person, open an NRE account and do a FD. You would get tax free returns of 9% which is zero risk. Pls let me know in case you are moderate risk to high risk investor ?

  8. Ravi says:

    Hi , Great Article. 

    Can you please let me know if NRIs can invest in chit funds

  9. Tanmoy Banerjee says:

    Pls advice on investment to be made by an India born NRI who is presently an US Citizen planning to invest in Indian Stocks & Mutual Funds.

    • Suresh says:

      Tanmoy, Yes NRI’s can invest in stocks and mutual funds. Due to stock market volatility, you need to be little careful in choosing winning stocks. Regd MF’s, you can invest in variety of funds like Birla SL Gen Next, Birla SL Frontline, ICICI Pru focussed bluechip fund etc,

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