Setting a myth to rest
All NRIs are not equal.
In the 70s and 80s, being an NRI implied being wealthy. Every NRI was assumed to be stinkingly rich. While that may or may not have been true, NRIs today come in all sizes – rich, middle class and sometimes even poor.
Besides wide diversity in income, they are spread across the globe and engaged in a variety of professions. In terms of investor profile, there is a lot of difference between the Silicon Valley Indian entrepreneur and the petrol attendant in Dubai. So focus on the set of NRIs that you can target and service more easily.
Where can NRIs invest?
According to RBI rules, NRIs can freely invest on repatriation and non-repatriation basis in the following securities:
· Government dated securities/Treasury bills
· Units of domestic mutual funds
· Non-convertible debentures of a company incorporated in India.
NRIs are not permitted to invest in small savings or public provident fund (PPF).
An important point to keep in mind that NRI investments need to comply with two sets of regulations – India and the country that they are currently resident in. This is important as each country could have a different set of rules. For example, NRIs in the Middle East have no restrictions on where they could invest. On the other hand, USA has severe restrictions on where its residents can invest, even if the residents are not US passport holders.
Dual taxation and currency risk
Two important considerations are taxation and currency risk. While taxation is not so much an issue for Middle East NRIs, you need to understand tax implications of your client in his/her current country of residence.
NRIs face the additional risk of currency fluctuations. So be mindful of this.
Banking facilities
NRIs can open NRO and NRE accounts in the form of current, savings, recurring or fixed deposit accounts through which all transactions can be carried out. It should be noted that NRE accounts cannot be held jointly with residents. They also have an option to open foreign currency non-resident (bank) account – FCNR (B) Account in the form of term deposits of 1 to 5 years.
Varied assignments
Apart from investing in equities and mutual funds they may also task you with buying property in India in which case you have to ensure that the transaction process is smooth. The RBI permits NRIs and persons of Indian origin (PIO) to buy immovable property in India other than agricultural land/plantation property or a farm house out of repatriable and/or non-repatriable funds.
India Growth Story
Rajesh Jha, CEO of Jain Investments who handles NRI portfolio says that a lot of them wanted to participate in the India growth story when the market was booming. “We didn’t have to push hard to convince them to invest in India because developed markets were not offering great returns and they were aware about the relatively high return which Indian markets can offer. It is also easier since they have Indian roots,” says Rajesh.
Go online
Distance is not a barrier when you communicate with your NRI clients through email, teleconferencing and webcast. Advisors can make available various important forms on their website so that clients can download them to fill up and send it to you. However the process may sometime be long drawn and you may miss out on the correct entry/exit/switch of your client’s money. Advisors can start a website in case they don’t have one and give online access to their portfolios with a login access.
Documents
It is also important to inform your NRI clients about the necessary documents, forms and authorization required to carry out the transactions on a timely basis. Advisors can ask their NRI clients to keep such documents with their relatives or close friends in India so that the access is swift.
High service standards
You will be held to higher levels of service and professional conduct. They set these benchmarks consciously or unconsciously against the standards in their current location.
Jayant Vidwans, President of SOFP brings out another practical dimension. “You have to adjust your communication according to the time schedule and the country where your client is based out of. Additionally a power of attorney is also required for seamless transactions,” says Jayant.
