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Portfolio Investment Scheme(PIS)

Portfolio Investment Scheme(PIS)

Reserve Bank of India (RBI) has permitted NRIs to invest in shares/convertible debentures of Indian companies through Portfolio Investment scheme (PIS) of designated banks approved by RBI.

PIS allows NRIs to invest in shares of Indian companies, in secondary market for purchase/sale of shares or convertible debentures through a registered stock broker on a recognised stock exchange on repatriable and non repatriable basis. Federal Bank is authorised by RBI to issue Permission Letter to NRIs on behalf of RBI to transact in secondary market.

  • Features & Benefits
  • Transactions Covered
  • FAQs
  • Rates & Charges
  • Tie Ups
  • Get Assistance
  • Speedy account opening.
  • No minimum balance for opening a PIS account.
  • Low transaction charge.
  • Internet banking facility for PIS account.
  • Computation and deduction of capital Gains Tax on behalf of customers.
  • Issue of TDS Certificates to customers.
  • Mandatory reporting of PIS transactions to RBI on daily basis.
  • Simplified Documentation for account opening.
  • Facility to choose from wide range of registered empanelled brokers with Federal Bank.
  • Facility for easy transfer of funds between linked accounts.
  • Nomination facility.
  • Normal Interest rate is applicable to funds available in the PIS account.
  • Daily statement of transactions.

If you are an NRI customer and would like to open a PIS account, please submit your contact details. We will get in touch with you. To submit your contact details, please click here.

Permitted Transactions

  • Equity Share and Convertible Debentures purchased from secondary market.
  • Shares acquired by split

Excluded Transactions

  • IPO
  • Bonus
  • Rights
  • ESOPs
  • Shares acquired on conversion of ADRs/GDRs
  • Shares acquired under Direct Investment Schemes
  • Shares purchased outside India from other NRI/OCB
  • Mutual Funds
  • Insurance investments

Permissible Credits

  • Inward remittance in foreign exchange through normal banking channels
  • Transfer from applicant's other NRE accounts or  FCNR(B) accounts or NRO accounts maintained with banks in India
  • Net sale proceeds (after payment of applicable taxes) of shares and convertible debentures which were acquired on repatriation basis(for NRI PIS) and non repatriation basis(for NRO PIS) and sold on stock exchanges through registered brokers.
  • Dividend or income earned on investments under PIS.

Permissible Debits

  • Outward remittances of dividend or income earned.
  • Amount paid on account of purchase of shares and convertible debentures on repatriation basis or non repatriation basis on stock exchanges through registered broker under PIS.
  • Any charges on account of sale/purchase of shares or convertible debentures under PIS.
1.  What is Portfolio Investment Scheme (PIS) to NRIs?
 
Portfolio Investment Scheme (PIS) is a scheme of Reserve Bank of India defined in Schedule 3 of Foreign Exchange Management Act 2000. As per the scheme the NRIs can purchase and sell shares and convertible debentures of Indian Companies on a recognized stock exchange by routing such purchase/sale transactions through their account with a Designated Bank Branch. (With effect from 29/11/2001 RBI has restricted OCBs from making fresh purchases. They can however continue their existing holdings or sell off the same).
 
2. Can NRIs invest both on repatriation and non repatriation basis and how?
 
Investments can be made on repatriation or non-repatriation basis.  For investments under repatriation basis, a separate NRE SB PIS account is opened by remittance from overseas/NRE/FCNR account.  If the investments are on non repatriation basis, a separate NRO SB PIS account is to be opened by remittance from overseas/NRE/FCNR/NRO account/Local sources. 
 
3. In case the NRI is already having NRE/NRO account, is it necessary to open another NRE / NRO account for PIS?
 
A separate NRE SB PIS for repatriable investments and NRO SB PIS for non repatriable investments have to be opened exclusively for the purchase/sale of shares and convertible debentures. 
 
4. Is it permitted for an NRI to have more than one bank as a designated bank for his PIS transactions?
 
No. NRIs can open only one PIS account  with a  bank for his transaction. 
 
5.  Can NRIs do day trading?
 
No. Day trading is not allowed, no short selling is allowed and NRIs shall take delivery of shares and convertible debentures purchased and give the delivery of shares and debentures sold.
 
6.  Can NRIs undertake futures/options traded in Exchanges?
 
Yes.  NRIs can execute futures/options etc. which are traded in the Stock Exchanges on non repatriation basis (through NRO SB PIS A/c.) only, subject to SEBI approved limits.
 
7. Is there any limit for purchase/sale of shares / convertible debentures by an NRI in the secondary market?
 
Investments on repatriation /non repatriation shall be upto 5 % of the paid up capital of the company for a single NRI. Aggregate Investments by all NRIs cannot exceed 10 % of the paid up capital of the company. The aggregate Investments can be upto 24 % if the general body of the Indian company passes a special resolution to that effect. This limit is monitored by RBI on a daily basis and advises Banks if the limit is reached so that further investments shall not be allowed. 

8. When a resident Indian becomes a non-resident, is it required to change the status of holding from Resident to Non-Resident?
 
As per section 6(5) of FEMA, NRI can continue to hold the securities which he/she had purchased as a resident Indian, even after he/she has become a non resident Indian, on a non-repatriable basis.
 
9. When a non-resident Indian becomes a resident in India, is it required to change the status of holding from Non-Resident to Resident?
 
Yes. NRI has  to inform the change of status to the designated authorized dealer branch, through which the investor had made the investments in Portfolio Investment Scheme and the DP with whom he/she has opened the demat account. Subsequently, a new demat account in the resident status will have to be opened, securities should be transferred from the NRI demat account to resident account and then close the NRI demat account and PIS account.
 
10. Does the NRI require permission to purchase securities by subscribing to public issue?
 
NRI/NRO can purchase shares under IPO if the issuing company is issuing shares to NRI on the basis of specific or general permission from GOI/RBI. Therefore, individual NRI need not obtain any permission.
 
11. If the NRI acquire shares in Primary market both on repatriation and non-repatriation basis, should the sale proceeds of such holdings have to be routed through PIS account with the Designated Bank?
 
No.  The shares/convertible debentures purchased in Primary Market under IPO need not be routed through the Designated Bank Branch since this does not come under PIS.
 
 
12.  What are the Tax Implications of Investments?
 
Currently there is no long term capital gain for sale of shares through stock exchanges, if the holding period is more than one year.  As per Sec. 10(38) long term capital gains have been exempted from tax if the sale is through recognized stock exchange & STT is deducted on the same.
 
If sold within one year of purchase, short term capital gains will be deducted from the sale proceeds at the rate of 15.45%(15% plus Education Cess @ 2% as per Clause (11) and Secondary & Higher Secondary Education Cess as per Clause (12) 0.15% thereon). TDS certificate will be issued by the bank to the NRI for the tax deducted. The bank is required to deduct tax from the capital gains on sale of shares at specified rates on short-term capital gains.
 
13.  Can joint accounts be opened under NRE/NRO SB PIS?
 
Yes. 
 
14. Can NRIs receive shares in inheritance?
 
Yes, as an NRI you can receive shares in inheritance. RBI permission is not required to be obtained and the shares will be held on non-repatriable  basis.
 
15. How the resident status shares will be settled by an NRI?
 
The shares purchased through primary / secondary market as a resident will be held on non-repatriation basis. Once the customer becomes an NRI, these shares can be credited to NRO DEMAT Account. These shares can be sold in secondary market without PIS permission. The sale proceeds can be credited to NRO SB Account after payment of capital gain taxes
 
16. Does an NRI require PIS permission to purchase shares in primary market (IPOs) on repatriable /non repatriable basis?
 
No, as an NRI you can purchase shares in primary market on repatriable/non repatriable basis and application money can be paid through regular NRE SB/NRO SB Account or through inward remittance.
 
17. What are the banned and caution scrip for NRI customers?
 
The Reserve Bank of India monitors the investment position of NRIs/FIIs in listed Indian companies, reported by designated banks, on a daily basis.
When the total holdings of NRIs/FIIs under the Scheme reaches the limit of 2 percent below the sectoral cap, Reserve Bank will issue a notice (caution list) to all designated branches of designated banks cautioning that any further purchases of shares of the particular Indian company will require prior approval of the Reserve Bank. 
Once the shareholding by NRIs/FIIs reaches the overall ceiling / sectoral cap /statutory limit, the Reserve Bank places the company in the Ban List. Once a company is placed in the Ban List, no NRI can purchase the shares of the company under the Portfolio Investment Scheme. List of caution/banned RBI script is available at http://www.rbi.org.in/scripts/BS_FiiUSer.aspx
 
18. Can an NRI transfer shares purchased under PIS to others under private arrangement?
 
Shares purchased under PIS on stock exchange shall be sold on stock exchange only. Such Shares cannot be transferred by way of sale under private arrangement or by way of gift (except by NRIs to their relatives as defined in Section 6 of Companies Act, 1956 or to a charitable trust duly registered under the laws in India) to a person resident in India or outside India without prior approval of the Reserve Bank of India.
 
19. Can NRI trade in Currency derivative segment of the Exchange?
 
No, only "a person resident in India" as defined in section 2(v) of FEMA Act 1999 are allowed to participate in currency derivative segment of the Exchange.
 
20. Can rights/bonus shares be issued to NRI?
 
FEMA provisions allow Indian companies to issue Rights / Bonus shares to existing non-resident shareholders, subject to adherence to sectoral cap as may be applicable.
 
21. In case a person who is resident in India becomes a non-resident, will he/she be required to change the status of his/her holding from Resident to Non-Resident?
 
As per section 6(5) of FEMA, NRI can continue to hold the securities which he/she had purchased as a resident Indian, even after he/she has become a non resident Indian, on a non-repatriable basis.
 
  • Account Opening and Minimum Balance Charges –Nil
  • Transaction Charges-Rs 100/-+Service Tax per segment and independent of volume of trade.
  • Annual Maintenance Charges –Rs 1000/- + Service Tax

For more details, please contact PIS Division of Federal Bank

 

PIS Division I Federal Towers I Marine Drive I Ernakulam I Kerala 682031

Contact numbers: 91 484 2385582 /2385505  

Email:  pis@federalbank.co.in

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Product Type:  Portfoilio Investment Scheme
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