22nd July 2025 (15 Topics)

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NRIs Face Regulatory Hurdles in Opening Demat Accounts

Context

Startups like Rupeeflo, in collaboration with stockbrokers such as Zerodha and Angel One, are attempting to digitize and simplify the cumbersome account opening process for Non-Resident Indians (NRIs) investing in Indian markets.

Demat Account for NRIs:

NRIs must open a Portfolio Investment Scheme (PIS)-linked demat account with a registered broker to invest in Indian securities. This process involves multiple compliance steps under RBI and SEBI

Current Procedure:

Physical submission of 20–30-page account opening forms.
Mandatory notarization of Know Your Customer (KYC) documents.
Notarization must be done through entities such as licensed notaries, scheduled commercial banks, Indian embassies, or court authorities

Key Challenges:

In-person document submission and manual notarization requirements delay and discourage overseas investors.
SEBI regulations do not permit webcam-based IPV (In-Person Verification) or e-signing if the NRI is not present in India.

GIFT City Exception:

Under the International Financial Services Centres Authority (IFSCA) at GIFT City, NRI onboarding is allowed through face-to-face KYC processes conducted by fintechs operating under a separate regulatory framework.

DEMAT ACCOUNT

Definition & Purpose

Demat Account = Dematerialised Account
Acts as a digital repository to store financial securities electronically.
Eliminates the need for physical share certificates.

Key Functions

Facilitates buying, selling, holding, and transferring of securities.
Seamless trading via stock exchanges.
Enables online portfolio management.

Assets Held

Equity shares, bonds, debentures, mutual fund units, government securities, Exchange-Traded Funds (ETFs).

Regulatory Oversight

SEBI – Main regulatory authority.
Depositories:
- NSDL (National Securities Depository Ltd)
- DSL (Central Depository Services Ltd)

Key Concepts

Dematerialisation: Conversion of physical certificates to electronic form.
Rematerialisation: Re-conversion to physical form (rarely used now).
DP (Depository Participant): An intermediary between the investor and depository (e.g., banks, brokers).

Transactions & Charges

Used for:
- Trading on stock exchanges
- Corporate actions (e.g., bonus shares, dividends)
May involve charges: Account opening fee, annual maintenance charges, transaction charges.

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NRIs Face Regulatory Hurdles in Opening Demat Accounts