The Lone NRI In India
SEBI and RBI have ensured that NRIs are put through many hurdles before they can invest in Indian stocks. A first-person account of the pains
I have lived about half of my life in the United States and the other, in India where I was born. Growing up in a Socialistic country, it was ingrained into me that your education was your passport to a successful future and nothing else mattered. After completing an undergraduate degree, I was drawn towards the share market. These were the ‘80s where every IPO was oversubscribed (the face value of a stock was always Rs10 or Rs100 or Rs1,000 (rare)). Many years later, I worked for a company incorporated in India and to cash my options, I had to get a PAN (Permanent Account Number) from the Indian Income Tax Office. After several mis-steps, I finally got the card (it felt like an achievement after the application was rejected twice on flimsy grounds) and I started looking at what I could do with my PAN number.
It was August 2013 and I was browsing a newspaper when an article caught my attention. The RBI had just released guidelines for NRIs and other foreign investors to invest in the Indian market. This spurred me to think that it is perhaps time to invest in India's equity markets. I was armed with my PAN card and a million passport size photos and other documentation such as my local address, permanent address, etc. I approached HDFC Bank to open an NRI Demat account. And then the fun began...
The new accounts manager in the local HDFC Branch was ill-equipped to open this kind of account but help was on the way. I was connected to the NRI accounts specialist at HDFC who offered to come home to help with the application process. He explained to me that there will be 4 accounts created - a PIS NRE account (Portfolio Investment Scheme Non-Resident Rupee and a non-PIS account. Further more, I had to open a PIS NRO (Non-Resident Ordinary Rupee) and a non-PIS NRO account. If this gets your head spinning, it’s just a start!
I took a giant leap of faith and signed all the forms in the right places and also gave him a check from my NRO account to get the proceedings started. True to his word, he had the account opened in 72 hours flat and he also connected me with an online trading account who would (for a nominal fees) allow me to trade online, since I lived half way across the world and can't really call my broker to make the trades. (HDFC Securities would not be able to offer an online trading account.)
A trip to the online trading company's sales office and I was confronted with another mountain of forms to fill and sign. I had read the fine print in the RBI notification and was told that I could trade not only in equities but also in Futures and Options. But there was a catch... To trade in Derivatives, I needed to get a CP Code from a securities company.
After an hour of filling applications and giving another set of copies of my ID, PAN card, passport size photos, my first born (just kidding!) I was told that it would take up to six weeks for the CP code to come through and then and only then can I start trading. It was time for me to return to the US and I began following up from the US. After about 8 weeks and much pushing and prodding I was told that my CP code was ready and the same was notified to my online trading company, who promptly set me up with an account. I was impressed that while it took time, things did move and I could actually trade from my home computer stocks half way across the world! So I traded happily ever after? Not so fast!
After about a week or so, I started noticing that I was being penalized for not having enough margin (although I thought I did because there was enough money in the PIS NRx account). When I started inquiring about this, I was slapped with a freeze on my trading account with a terse explanation that my CP Code has not still been issued and therefore I cannot trade! This got me squarely in between the eyes and I was on the phone hollering with the securities company as to how I did not have a "CP Code" and still could trade. A further two weeks elapsed before CP code was issued and this time around, the margins were established by the securities company and I could resume trading. I had started the process in July and it was December before everything was in place.
Trading went well for a few days till I hit another snag. Dealing with futures is a high risk, high reward proposition. I had bought a futures block and tried selling it within a few minutes because the stock was dropping. The online trading system registered the Buy but not the Sell for a full 24-hour window during which the price dropped alarmingly. My phone calls were not returned and before I knew it all my profits were wiped out because of a computer glitch at their end. The company issued a general apology to the trading public but the damage was done.
There is another wrinkle in this whole thing. Apparently NRIs and Foreign investors cannot trade on any stock! They can only do so from a list that is updated daily by the RBI. So the process is for the trader to look up this list, determine which stocks he/ she can buy and then proceed to do so. This reeks of socialism where a privileged few somehow managed to get on this list. This is a blatantly protectionist view on part of the government and should be done away with or the real companies in need of cash will not get them.
So why the title, you ask? Well in the course of my discussions with the online trading company, I found out that they had only five NRI accounts and only 1 was active (that would be me). So I was the guinea pig on which all these companies learnt to follow the RBI directives. Should I be happy about this? I don't know but I will continue to be active in Indian equities because I am at heart an optimist.
Tags : share trading account, online trading account in india, demat account , demat account opening , online trading account
Source from : http://www.moneylife.in/article/nri-investment-in-...