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What Are the Different Investment Options NRIs Have?
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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India is among the fastest-growing economies in the world. We are expected to clock a 6.5%+ growth rate in GDP in FY2025. Consequently, NRIs are increasingly looking to make investments in the country and participate in India’s growth story. But with wide-ranging choices available, it is important to be aware of the investment opportunities and ensure that they are aligned to your investment objectives. Whether you are looking to invest in mutual funds, shares and stocks, or anything else, each comes with its pros and cons and crucial considerations. This blog presents some of the leading NRI investment options available in India and guides you through the right decision.
Here’s what we’ll cover:
Mutual Funds
As of March 2025, the Assets Under Management (AUM) of the Indian mutual fund industry was approximately ₹65.74 lakh crore. When NRIs invest in mutual funds in India, they can use either of the following two modes:
An NRI can directly invest in mutual funds in India via the self-mode, provided they have completed their KYC formalities with an Indian Bank. It usually includes the submission of KYC documents, like overseas identity proof, residence proof, bank statement, etc.
Another popular way to invest in mutual funds in India is through the Power of Attorney. NRIs can authorise a trusted individual in India to make the investments on their behalf. However, the signatures of both the NRI investor and the Power of Attorney holder must be there on the KYC documents.
Key Requirements
Pros & Cons
Professional fund management
Some AMCs do not allow NRIs from certain countries
Diversification across assets
Repatriation restrictions on investments done via NRO accounts
Potentially high returns over long term
Tax implications vary based on holding period
Direct Equities
The Indian stock market hit ₹438.9 lakh crore market cap in December 2024. NRI investors can invest in stocks and shares via IPOs, i.e., initial public offerings or secondary markets. NRIs can invest only in equities (stocks) and convertible debentures through the Portfolio Investment Scheme (PIS) under the Reserve Bank of India (RBI).
NRIs can only trade on a delivery basis, meaning they must take ownership of shares and cannot engage in intraday trading.. NRIs cannot hold more than 5% of a company’s total paid-up capital
Key Requirements
NRIs need the following accounts:
Pros & Cons
Direct exposure to high-growth companies
High market volatility
Can invest in IPOs & secondary markets
Regulatory restrictions on stock categories
Diversification opportunity in Indian economy
No intraday trading
Alternative Investment Funds
AIFs are alternative investment funds that enable investors to invest their money in various avenues, like hedge funds, venture capital, etc. When investing in AIFs, NRIs should at least invest ₹1 crore.
Here are the three categories of AIFs as per SEBI guidelines:
While Alternative Investment Funds are open to investments from NRIs in India, certain geographical restrictions may apply per the AMC compliance policy.
Key Requirements
Pros & Cons
High return potential
High minimum investment requirement
Access to non-traditional assets
Higher risk and complex structures
Suitable for HNIs looking for long-term investments
Geographic restrictions for NRIs
Portfolio Management Services
The AUM of the PMS segment has almost doubled in the last five years, reaching ₹32.22 lakh crore as of 2024. Professional management services (PMS) are a customised approach to investing and cater to the unique needs of NRI investors. These services provide a dedicated portfolio manager to the NRI investor for constructing and managing their portfolio.
Key Requirements
Pros & Cons
Professional management
High minimum investment (varies by PMS provider)
Customization based on risk appetite
Fees may be higher than mutual funds
Suitable for long-term investors
Regulatory restrictions apply
Summing Up!
NRIs investing in India must explore all the investment options mentioned above and make decisions based on their financial goals and risk tolerance. Be it mutual funds, alternative investment funds, or the stock market, the right portfolio mix can help grow your wealth. However, if you need assistance with any NRI services in India, Kotak Mahindra Bank is always here for you.
FAQs
1. Is India safe for NRI investments?
It is safe to invest in India as an NRI, provided you choose the right investment avenues. Also, complying with taxation and repatriation rules further secures your investment.
2. How are NRIs taxed for mutual fund investments?
An NRI has the option to invest in both equity and debt-oriented mutual funds. However, taxation depends on the type of fund and the period of holding.
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