One of the most popular investment alternatives for NRIs in India is mutual funds. Non-resident Indians can invest in equities, debt, or liquid funds through mutual fund investments. However, the NRI investment process differs slightly from the resident Indian investment process. NRIs should be familiar with the mutual fund schemes, procedures, and rules before investing in mutual funds in India. We have discussed the procedure for NRI mutual fund investing in this article, along with other crucial information.
What are mutual funds?
Suppose four friends want to buy a 12-piece box of pens priced at Rs.100/- but they all have Rs.25/- only. They pool their money, buy the box, and then distribute three pens based on their contribution.
This is a fundamental model on which Mutual Funds operate. The box of pens here is the fund, and the pens are units. You buy specific units of the fund with an asset value (NAV). The value of this NAV changes with time based on the fund’s growth, resulting in your gains.
Can NRI invest in Indian mutual funds?
One of the most common questions is whether or not NRIs can invest in mutual funds in India. To simply answer that, yes. NRIs, as well as PIOs, can invest in Indian mutual funds provided they adhere to the regulations of the Foreign Exchange Management Act (FEMA). They can invest in mutual funds in India on a repatriation and a non-repatriation basis. However, there are only a few asset management companies (AMCs) that accept mutual fund applications from NRIs in the USA and Canada. So, NRIs from these countries must be checked when investing in Indian mutual funds.
NRIs are offered most of the benefits and conveniences as resident investors while investing. They can invest in equity funds, debt funds, or hybrid funds depending on their investment goals and risk tolerance. NRIs can repatriate the redemption proceeds as and when they wish to.
How can NRI invest in Mutual Funds in India?
One of the most common questions is whether or not NRIs can invest in mutual funds in India. To simply answer that, yes. NRIs, as well as PIOs, can invest in Indian mutual funds provided they adhere to the regulations of the Foreign Exchange Management Act (FEMA). They can invest in mutual funds in India on a repatriation and a non-repatriation basis. However, there are only a few asset management companies (AMCs) that accept mutual fund applications from NRIs in the USA and Canada. So, NRIs from these countries must be checked when investing in Indian mutual funds.
NRIs are offered most of the benefits and conveniences as resident investors while investing. They can invest in equity funds, debt funds, or hybrid funds depending on their investment goals and risk tolerance. NRIs can repatriate the redemption proceeds as and when they wish to.
We have listed below specific requirements based on the guidelines of FEMA for being an NRI for doing the same:
1. An NRE/NRO Bank Account: For an NRI, their funds can only be managed through the NRE or NRO Bank Accounts in India. Therefore, it is mandatory for an NRI to carry out investments in Mutual Funds using either of these accounts
2. Documentation: There is a set of documents that you must produce to invest in mutual funds in India. The following documents are needed for Know your Customer (KYC) of Mutual Funds for NRIs:
Filled and signed KYC Form
- Identity Proof: Passport and PAN Card (Self-Attested)
Address Proof: Mandatory for NRIs. (Includes both correspondence and overseas address)
- Cancelled Cheque of NRE/NRO Account
Now, NRIs can either invest in mutual funds online through direct transactions from their NRE/NRO Accounts or get a Power of Attorney (PoA) to invest money on their behalf. A thing to note here is that in the case of a PoA, the signatures of both the NRI Investor and the PoA must be present on the KYC Documents.
3. KYC/Attestation (In-Person Verification): The verification is done for NRIs by a certified entity to acknowledge the fact that the investor has in his/her possession all the original documents that he/she has mentioned in the KYC Form. The following process can do it:
- The IPV can be done seamlessly on a video call (Skype, Appear.in, etc.). Earlier, NRIs were required to visit the offices or someone visited the investor to verify the papers at their home or workplace
- You can schedule the video call with the agencies and continue with the IPV. Only the following entities have the authorization to carry out IPV:
Did you know? Significant agencies have their mobile apps now for instant authentication through biometrics or OTP. The video call might include questions about the details you have filled in the form, and the application can be canceled if any contradictions occur.
