What is a Repatriable Demat Account?

Today, opening a demat account is the first step to participate in the equity markets. A demat account is used to hold your equities and other securities in electronic mode. The big question is what if you are a non-resident Indian (NRI)? Can you still hold shares in India and have an Indian demat account?

The answer is that you can have a demat account, even if you are an NRI, although you must specify whether you want a repatriable demat account or a non-repatriable demat account.

A repatriable demat account is through which a non-resident Indian (NRI) can invest in Indian equity or capital markets and repatriate the funds generated from these investments abroad.

In this blog, we will learn more about the NRI repatriable account.

Demat Account and Their Different Types

In order to participate in the Indian markets, a demat account is required, which basically stores all your investments, right from stocks, mutual funds, bonds, etc, in dematerialised format, safely for future sale of these securities and assets. There are four different types of demat accounts that investors can create based on their residential status and general use cases. The types of demat accounts are as follows:

1. Regular Demat Account
2. Basic Services Demat Account
3. Non-Resident Repatriable Demat Account
4. Non-Resident Non-Repatriable Demat Account

You can refer to the table below to briefly understand the characteristics of each of these demat accounts based on their features

What are Regular Demat Accounts?

A regular demat account is the one that an Indian citizen can open with any DP (Depository Participant), registered with SEBI. The regular demat account is the one where any person in India can open and hold shares and other assets in custody in a digital dematerialised format. A regular demat account can be linked to a resident trading account and to a resident bank account only. Suppose you are a resident and then become an NRI during the year, then you need to open a fresh NRI demat account and port shares to that account.

What is a Repatriable Demat Account?

If you are an NRI, then you need to open a specified NRI demat account. The NRI demat account can either be a repatriable demat account or a non-repatriable demat account. At the time of NRI account opening, the person has to decide whether they want a repatriable demat account or a non-repatriable one.

In the case of a repatriable demat account, there are two key features:

• Firstly, the repatriable demat account has to be necessarily linked to a Non-Resident Indian (NRI) bank account only.
• Secondly, the earnings from the repatriable demat account have no repatriation limits.

Almost all the major DPs offer the option of repatriable and non-repatriable demat accounts to the investors. In a repatriable demat account, you can only hold shares purchased out of funds remitted from abroad into your NRE account. Funds generated in India cannot be used to buy shares in a repatriable demat account.

What is a Non-Repatriable Demat Account?

A non-repatriable demat account is a demat account that does not permit complete repatriation of earnings from the sale of shares or from dividends earned on the shares abroad. Funds can be repatriated abroad to the bank account of the NRI using the non-repatriable demat account only up to a limit of $1 million or equivalent each financial year.

Generally, a non-repatriable demat account has to be linked to a Non Resident Ordinary (NRO) account, which is the equivalent of a resident domestic bank account.

Non repatriable demat account is normally opened by NRIs who have income flows in India and want to use the rupee flows to buy shares or other securities.

Documents Required to Open a Repatriable Demat Account?

The NRI has to go through the detailed KYC procedure for opening a repatriable demat account. All the important identity verification documents like:

• Passport
• Visa copy
• Proof of Indian residence
• Proof of international residence
• Work permit
• Profile of the company working for
• Copies of the salary slip
• International credit score
• Domestic credit score
• Details of assets in India and abroad etc.

Like resident Indians, even NRIs have to go through KYC, which they can do through the branch of an Indian bank. Alternatively, they can do the KYC when they visit India or they can do it online and submit documents at the local embassy to the designated persons.

Key Features of NRI Repatriable Demat Account

Here are some of the key features of an NRI Repatriable Demat Account held by an NRI that you must know about if you are planning to open one in the future.

• An NRI Repatriable Demat Account is typically opened by an NRI who plans to remit funds from abroad and use the funds to buy shares and other securities in the Indian market and hold it in electronic custody in the demat account.
• The NRI Repatriable Demat Account must be mandatorily linked only to a NRE bank account, since that is a repatriable bank account. The NRO account is a resident account and cannot be linked for repatriation purposes.
• Since the NRI Repatriable Demat Account is linked by default to an NRE (Non-resident External) bank account, this account is also popularly referred to as an NRE Demat Account or merely as a repatriable demat account.
• All earnings from the sale of securities in the repatriable demat account, dividend earnings, and any gains from sale can be transferred to another country, subject to an outer limit of $1 million per financial year in case of an NRO (Non-resident ordinary) account. There are no limits for NRE accounts. This is meant to avoid a drain on the forex resources of the RBI.
• If the same NRI wants to buy shares for repatriation and for non-repatriation, then they must open two demat accounts. The NRE demat account and the NRO demat account cannot be mixed and must be kept distinct from one another.
• The NRE demat account has two sub-accounts called NRE PINS account and the NRE Non-PINS account. The NRE PINS account is used for trading in shares on the NSE and the BSE. The NRE Non-PINS account is used to invest in mutual funds, IPOs, ETFs and the sale of any shares received as a bonus or splits.

Here, it must be noted that NRIs cannot indulge in intraday trading and can only trade for mandatory delivery.

Conclusion

If you are an NRI and want to open a demat account to take back funds to the foreign country, then you need to open a repatriable demat account. This is typically linked to an NRE bank account. The standout feature of a repatriable demat account is that the funds from the sale of the assets or dividends can be repatriated abroad without limits.

Disclaimer: This content is only for educational/ informational purposes. It does not make any recommendation to act or invest.