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Published on Sunday, July 10, 2016 by Chittorgarh.com Team | Modified on Sunday, August 9, 2020
An NRI is an individual resident outside India who is a citizen of India or is an 'Overseas Citizen of India' cardholder within the meaning of Section 7(A) of the Citizenship Act, 1955.
Yes, Eligible NRI's can invest in Initial Public Offers in India.
Note: Banks like ICICI Bank doesn't offer Online IPO and Mutual Funds Investment for NRI customers other than the Middle East customers. If the NRI customer is in India, he can apply in IPO or buy Mutual funds with the help from the bank branches. As per ICICI Bank, this limitation is because of regulatory requirement where products which are sold through a fund manager cannot be offered to the NRI customers residing in the US, UK or Canada.
For NRI's, it is recommended to read the Red Herring Prospectus of the IPO they planning to invest for more detail.
Most IPO Red Herring Prospectus in India has a section like below.
Eligible NRI(s): NRI(s) from jurisdictions outside India where it is not unlawful to make an offer or invitation under the Offer and in relation to whom the Bid cum Application Form and this Red Herring Prospectus will constitute an invitation to purchase the Equity Shares.
Eligible NRI's can invest in IPO's under two categories:
NRIs can maximum bid in such a number of Equity Shares so that the Bid Amount does not exceed Rs 200,000 (less Retail Discount if any).
NRIs can maximum bid for Equity Shares not exceeding the Offer size, subject to applicable limits.
Note:
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No, NRIs do not require any permission to invest through IPO.
Yes. NRIs can invest in Indian IPO, NCD and Bonds. NRI IPO and Mutual Fund investment are permitted through the NRE as well as NRO Bank accounts. US & Canada clients can only invest if the company mentions in their IPO prospectus.
Some banks like ICICI Bank have started issuing UPI to NRIs as well. This makes it easy for NRI clients to apply for IPOs. Other banks should follow suit.
NRIs do not need any special approvals from RBI to buy or sell IPO shares. The IPO investment-related bank transactions are done through Non-PIS saving bank account. They are not reported to RBI.
Investing in IPO in India is online and easy if you have an NRI 3-in-1 account with a bank.
If you have your demat account with a broker who doesn't offer 3-in-1 account (i.e. Zerodha, Sharekhan, 5Paisa, ProStocks), you can still apply in IPO using the net banking facility of the bank where you have your Non-PIS Saving Bank Account.
Note:
Yes PAN Card (Permanent Account Number) is mandatory for NRI to invest in the stock market in India and to invest in IPO's.
PAN is mandatory to open an NRI Demat Account with the stockbroker. The Demat account is required to invest in IPO or transact in shares in India.
An NRI customer who is eligible to invest in an IPO can apply online through the net-banking facility of the bank where they have a Non-PIS Saving Bank NRI Account.
Most banks including ICICI, HDFC, Kotak, SBI and Axis bank offer online IPO application (ASBA).
As most companies do not make NRI's eligible to invest in IPO of Equity Shares, NRI customers should check the IPO Red Herring Prospectus (RHP) to check the eligibility.
An NRI is permitted to subscribe to the public issue provided the company offering the issue allows NRI to participate in its issue. They detail related to this is published in the Red Herring Document (RHP) of the IPO.
Note that most companies do not permit NRIs to invest in their IPO due to additional compliance costs.
NRIs can also only apply in an IPO through the ASBA facility provided by the bank where they have their NRI bank account. NRI's can't apply in IPO through an online broker like Zerodha as they use UPI as a payment gateway which is not available to NRIs.
An NRI does not require any PIS approval to apply for a public issue and can invest using Non-PIS NRE or NRO bank, Trading and Demat accounts depending on whether an NRI wants to invest on a repatriation basis or a non-repatriation basis.
Yes, an NRI can buy/sell SME shares just like other shares listed at BSE and NSE using their NRI account.
SME shares which are listed at BSE SME and NSE Emerge platform are part of the 'SM' category. Some brokers may have certain restrictions for this category.
Stockbrokers like Zerodha and ProStocks allow trading in SME shares.
The only thing different about stocks listed here is that they are traded in lots just like F&O.
