Indian mutual fund industry is growing by leaps and bounds with newer records being made with every passing month. Lately in May 31, 2022; total net assets under management (AUMs) of mutual funds surpassed ₹13.22 lakh crore across 312 fund schemes, as per the latest AMFI data.
It is not a surprise, then, that a large number of non-resident Indians (NRIs) may intend to make hay while the Sun shines.
Notwithstanding some logistical hassles, they are very well permitted to invest in domestic fund schemes, albeit in the local currency.
Let us explore how can NRIs invest in mutual funds in India.
Non-resident Indians (NRIs) can invest in mutual funds in India. There is no bar in making investment in mutual funds. However, they can’t make investment in mutual funds in a foreign currency.
Thus, the NRI investors are required to have a bank account in India. A on resident can open an NRE (Non-Resident External) account or NRO (Non-Resident Ordinary) denominated account in a commercial bank in India.
For the uninitiated, NRE is a rupee account from which funds are freely repatriable which implies funds in the account can be transferred abroad. At the same time, NRO account is also rupee-denominated but it is a non-repatriable account that can be opened with funds which are either remitted from overseas or from inside the country.
KYC required
NRIs must comply with another condition to invest in India i.e., they must be KYC-compliant investors. The documents required for this include a recent photograph, PAN card, address proof and a certified copy of the passport.
Following this, these documents must be submitted to either a mutual fund house or a KRA (KYC registration agencies) in India.
If the NRI is already KYC-complaint before leaving India, the KYC status should be updated.
It’s only after this, the NRI will be given an NRI compliant status. In order to carry out modification, one can download KYC modification form on the websites of Indian mutual fund houses or KRAs.
After the KYC-related formalities are satisfied, NRI can use the net banking facility of NRE/NRO account to make payment to mutual fund house to buy the units. S/he can also set an SIP mandate to make payments at regular intervals.
Invest offline
Although not relevant any more, but there is an option to invest in the mutual funds via offline as well. For this, one can send the application form attached with KYC documents and a cheque or a DD (demand draft) from the bank.
Alternatively, NRIs can also invest through their demat accounts where they can set an SIP mandate or make a lump sum payment.
Investing via a representative
In case an NRI investor doesn’t wish to undergo the KYC formalities, s/he can also appoint their representative authorised to carry out the transactions of purchase and redemption of mutual fund units.
This appointing of representative happens via power of attorney (POA). At the time of carrying out transaction with a mutual fund house, the representative is supposed to submit the notarised copy of the POV.