Everything You Need to Know about Mutual Funds for NRIs

Join DBS Treasures

Reading Time: 3 Minutes

Key Takeaways: Mutual funds are smarter investment options that are well-regulated and professionally managed. The article explores if NRIs can invest in mutual funds and how they can go about it.

Introduction

A mutual fund pools money from many investors to purchase securities. The underlying nature of their investments often classifies mutual funds. The funds could be equity, debt or hybrid, allowing investors to choose based on their risk appetite and financial goals.

Can an NRI Invest in Mutual Funds?^[1]

The short answer is yes.

As an NRI, you need not take special approvals from SEBI or RBI to invest in mutual funds in India. But you do need to note two important points:

1. You will have to open an NRE or NRO account and complete your mutual funds KYC.
2. If you live in the USA or Canada, you may have to go through FATCA regulations before investing in mutual funds in India.

Foreign Exchange Management Act (FEMA) Guidelines on Mutual Funds for NRIs^[3]

FEMA regulates NRI investment in mutual funds in India. Let us take a look at their guidelines in brief:

According to FEMA 1999, an NRI is a person who has been -

• A person resident outside India, either a citizen of India or a person of Indian origin (PIO)
• In India for 182 days or more during a financial year and 365 days or more during the preceding four financial years
• deputed overseas for 180 days or more

There will be some limitations on which Asset Management Companies (AMCs) you can choose since not every AMC in India accepts an NRI investment.

Procedure to Invest in Mutual Funds

Banks or AMCs that distribute mutual funds in India cannot accept investment in foreign currency. Thus, it would be best to open an NRE or an NRO account. Once your account is activated and KYC is completed, you can invest remotely or through an individual in India authorised by a power of attorney.

You can execute orders through regular online banking instructions. The investment application with the KYC details should also specify whether the investment is repatriable or non-repatriable.

KYC for Mutual Funds

You need to complete a separate KYC process before starting investments in Indian mutual funds. The KYC documents consist of:

• A recent photograph
• Attested copy of your PAN card
• Your passport copy
• Proof of a permanent address in India
• Residence proof outside India
• Copy of your PIO or OCI card

Depending on the bank or AMC, you may also need to provide bank statements of your NRI accounts. If you are not in India, you can complete this process by getting in touch with your bank’s representative.

Another standard method is to have someone else invest on your behalf. Mutual fund companies in India allow you to do this through a Power of Attorney. However, signatures of both the NRI investor and the Power of Attorney (PoA) should be present on the KYC documents to make such investment types.

Final Note: NRIs are allowed to invest in mutual funds in India and earn returns. They are also easy to understand and access. NRIs can invest in mutual funds through NRE or NRO accounts in Indian banks after being KYC compliant.

Depending on your investment horizon or risk appetite, you can choose from a wide suite of wealth solutions with DBS Treasures. Apply Now !

References: ^{1 2 3}