Any NRI wants to invest in Indian Mutual Fund and follow the Process given below for a Smooth & Clean Flow.
Step 1- Opening the Required Bank Account: Mutual funds are not allowed to accept direct investments in foreign currency. Thus, NRIs need to open a NRO account (non-repatriable basis) or NRE account (repatriable basis) with an authorized Indian bank to invest.
- NRE Account: – This is a Non-Resident External (NRE) account which can be in the form of savings, current, fixed or recurring deposit. You need to deposit the foreign currency in this account. To be able to deposit Indian currency, you must open NRO account. There is no upper limit on the transaction amount in an NRE account.
- NRO Account: – The NRO or Non-Resident Ordinary account is in the form of savings or current account that is meant for NRIs to manage their income earned in India. In NRO account, foreign currency gets converted into Indian rupees after it gets deposited. An NRO account can be held jointly with another NRI as well as resident Indian or Relatives.
Step 2: KYC Compliance for NRI Investors:- To complete the KYC process, NRIs are required to submit a copy of their passport – relevant pages with name, date of birth, photo, and address. The current residential proof is must, whether temporary or permanent. Some fund houses may insist on in-person verification so they have to present in India to complete the in-person verification Process.
If they are making the payment via a cheque or a draft, then they must attach a Foreign Inward Remittance Certificate (FIRC) to confirm the source of funds. If not possible, then a letter from the bank would also be acceptable.
Step 3- Mode of Investment: Since, the NRI is not present in India Physically to Invest; they have the option to invest in mutual funds either by self or through a valid power of attorney.
- Direct Mode:- NRIs can carry out transactions, debiting or crediting through normal banking channels. Their application with the required KYC details must indicate that the investment is on a repatriable or non-repatriable basis. Banks might conduct an in-person verification, which can be fulfilled by visiting the India embassy in the NRI’s residential country.
- Power of Attorney: – Another method of Investment through someone else carried out by the holder of Power of Attorney. Mutual fund companies allow Power of Attorney (PoA) holders to invest on the behalf of NRIs and make decisions about their investments. It is compulsory that the KYC documents are attested by both the NRI investor as well as the PoA holder.
Step 4- Redemption: AMCs credit the corpus (investment + gains) after getting redemption request in the respective account after deducting the taxes. Some banks Allow transfer of the redemption amount directly to the NRO/NRE account. They can also be given the redemption amount through cheques.
“Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing”.