Types of demat accounts

We’ve discussed what a demat account is, the procedure to open a demat account and how to start your investments using it. Before you get started though, the smart thing to do would be to know the types of demat accounts you can open – and which one is the right one for you.

Quick recap – Demat, as the word suggests stands for dematerialization. A demat account is an online account which holds all your shares, bonds, securities, fixed deposits (FDs), mutual funds and exchange traded funds (ETFs).

Key Points:

  1. If you’re going to be moving your money back to your country, you’ll need a special demat account that allows for such movement.
  2. Non-repatriable funds (which cannot be taken abroad), are deposited in a different type of bank account known as a nNon-repatriable account (NRO).
  3. Transactions conducted through a non-PINS account – such as buy and sell of IPOs, FPOs, derivatives and mutual funds – are not reported to the RBI.

Moving on, there are two types of demat accounts you can get for yourself:

  • A repatriable demat account (NRE account),
  • A non-repatriable demat account (NRO account)

Repatriable demat account

Repatriable funds refers to funds that can be transferred abroad. If you’re going to be moving your money back to your country, you’ll need a special demat account that allows for such movement. Repatriable funds are deposited in a separate bank account known as a Non-Resident External Account (NRE account). The investments made using repatriable funds are managed through a NRE demat account.

Non-repatriable demat account

On the other hand, if you hold non-repatriable funds (which cannot be taken abroad), these are deposited in a different type of bank account known as a Non-repatriable account (NRO). To trade or invest with non-repatriable funds, you will need to hold an NRO demat account.

You can easily transfer your money from an NRE to NRO account. However, keep in mind that once the funds are transferred, the repatriability of your funds is lost and thus you will not be able to transfer them back to an NRE account.

NRE vs NRO Accounts

 NRE AccountsNRO Accounts
FundsFunds generated in India cannot be stored in an NRE account.All funds generated in India must mandatorily be stored here.
Joint HoldingsAllowed - but only with another NRI.Allowed with both NRIs and Indian residents.

What is PINS account?

Any Non-Resident Indian (NRI) wanting to trade in Indian stock market with repatriable money will need to operate via a Portfolio Investment Scheme (PINS) account. You can open a PINS account with any designated bank. In PINS account all your investments and transactions are regulated by RBI. NRI who wants to enjoy similar benefits enjoyed by a resident Indian can trade in NRO account without PIS account.

What is NON-PINS account?

Your transactions and investments in Non-PINS account are not reported to RBI. This account allows all the transactions in shares which are not allowed in PINS account. Transactions conducted through a non-PINS account – such as buy and sell of IPOs, FPOs, derivatives and mutual funds – are not reported to the RBI.

Point to remember: As far as investing in mutual funds is concerned, NRIs based in the UK, US, Canada and other non-FATF (Financial Action Task Force) countries are not allowed to invest in those schemes that include SAARC (South Asian Association for Regional Cooperation) countries.

Wrapping Up

  • You can open a demat account of any of these types with Upstox.
  • For NRI citizens it is very important to hold these accounts to trade in Indian stock market.
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