Why PIS(Portfolio investment scheme) copy is required to open NRI trading accunt?

Portfolio Investment Scheme (PIS) scheme of reserve bank of India
under which - Non Resident Indian (NRIs) can purchase/sell shares/convertible
debentures of Indian companies on Stock Exchanges under Portfolio
Investment Scheme. For this purpose, the NRI/PIO has to apply to a
designated branch of a bank, which deals in Portfolio Investment. All
sale/purchase transactions are to be routed through the designated
branch.

source : www.nseindia.com

Let me explain the process :

1.NRI can open 2 types of bank accounts either NRE( Where he is allowed to take the money back to the foreign country from where he transfers) or NRO ( where once he transfers the funds from foreign bank, he cannot take the money back to the foreign bank account).

  1. Once the bank account is opened, the NRI will get an approval from RBI(reserve bank of India) to be able to invest into Indian markets. This approval process is done by the bank where he opens the NRE/NRO account. This once approved the client now gets a PIS(Portfolio Investment Scheme) letter from the bank.

  2. Using this PIS letter the client can open a trading/Demat account with any broker to trade only on equity delivery based.

This is why PIS (Portfolio Investment Scheme) is required to open NRI Account

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