The Relevance of the Depository System in India to Non Resident Indians
The risks and cost associated with dealing in the physical form
has always been very high for the NRI investors. The depository
system, which allows the investor to hold securities in an account
and to transfer theses securities by means of account transfers
provides an efficient solution to these problems and substantially
removes the inconveniences due to geographical distances.
Acquiring, holding and disposal of securities in Indian Capital
Market by Non Resident Indians (NRI) and overseas corporate bodies
(OCB) either on repatriable basis or on no-repatriable basis is
governed by RBI guidelines and Foreign Exchange Regulation Act (FERA).
As per these, approvals are required for buying and selling of
securities in most of the cases. Details regarding the procedures
may be available with the designated bank branch through which
foreign exchange is handled or with the broking members who
normally deal for these segments of investors.
Operational issues pertaining to depository operations:
Specific issues with respect to opening and operating depository
accounts are as given below:
· In the depository system, with respect to the status of
investments, the only difference is the form in which the
securities are dealt. As it does not alter investment activities
per se, there is no need for any special approvals to open or
operate a depository account.
· The account can be opened by the person or by his/her power of
attorney holder provided the POA has the necessary authorizations.
· At the time of dematerialization of any securities into these
accounts, the account holder should hand over to his DP, copies of
RBI approvals obtained at the time of acquiring these securities.
If these securities were acquired under schemes which does not
require special approval from RBI by the acquirer, then no
approval letter is needed. (For e.g. when shares are issued to NRI
in public issues, RBI gives a general approval to the issuing
companies and the investor need not take any separate approval.)
· When securities are to be debited from the account, the account
holder should provide a copy of the relevant RBI approval for sale
of securities to the DP.
· When securities are to be credited to the account, the account
holder should provide a copy of the relevant approval for purchase
of securities to the DP.
· If the same approval is applicable to multiple
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