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 - A demat account is an online account which holds all your shares, bonds, securities, fixed deposits (FDs), mutual funds and exchange-traded funds (ETFs).
- If you’re going to be moving your money back to your country, you’ll need a special dematerialized account that allows for such movement.
- Non-repatriable funds (which cannot be taken abroad), are deposited in a different type of bank account known as a Non-repatriable account (NRO).
- 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 stock account (NRE account),
- A non-repatriable stock account (NRO account)
Repatriable stock account
Repatriable funds refer 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 dematerialized 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 an NRE stock account.
Non-repatriable stock 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 in non-repatriable funds, you will need to hold an NRO stock 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
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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.
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.
- 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.