How SEBI Safeguards NRI Investments in the Indian Market
- Editor
- Oct 13
- 5 min read
by KarNivesh | 13 October, 2025
Non-Resident Indians (NRIs) play a vital role in India’s economic growth. With over 3.5 crore NRIs worldwide and record-breaking remittances of ₹11.24 lakh crore (₹11,24,000 crore or about $135 billion) in FY25, their contribution to the country’s economy continues to rise. To protect these overseas investors, the Securities and Exchange Board of India (SEBI) has built one of the most secure and transparent regulatory systems in the world.
This post explains, in simple words, how SEBI safeguards NRI investments through strong rules, digital tools, and investor-friendly reforms.
The Growing NRI Investment Landscape
India’s NRI investment ecosystem has seen tremendous growth in recent years. By December 2024, total NRI deposits reached ₹13.43 lakh crore (around ₹13,43,000 crore or $162 billion) — a massive 43% jump from the previous year.
NRIs are diversifying their investments across different areas:
40% in real estate
20% in stocks
20% in fixed deposits and insurance
11% in private businesses
5% in gold
Even though they send huge remittances, direct participation in Indian stock markets remains low — with only about ₹6,761 crore invested through the Foreign Portfolio Investment (FPI) route, compared to total FPI assets of around ₹47 lakh crore.
Most NRIs live in Gulf countries, but now more are investing from advanced economies like the United States (27.7%) and the UAE (19.2%).
Challenges for NRI Investors
In the past, NRIs faced many hurdles when investing in India:
Complicated Know Your Customer (KYC) processes that required physical presence in India
Heavy paperwork and documentation
Difficult grievance redressal procedures
Unclear tax rules and currency conversion risks
Recognizing these challenges, SEBI has introduced a multi-layered system that simplifies compliance and strengthens investor protection.
SEBI’s Key Safeguards for NRI Investments
1. Portfolio Investment Scheme (PIS) – The Foundation
The Portfolio Investment Scheme (PIS) is SEBI’s main mechanism for NRIs to invest in Indian stocks and convertible debentures. All trades are made through authorized banks, ensuring full regulatory supervision.
Key features include:
An individual NRI can hold up to 5% of a company’s paid-up capital.
All NRIs together can hold up to 10%, extendable to 24% if the company approves it.
NRIs must use one designated bank for all PIS investments.
There are two account types:
NRE Account (Non-Resident External) – for repatriable investments (profits can be sent abroad).
NRO Account (Non-Resident Ordinary) – for non-repatriable investments.
Intraday and derivative trading are not allowed — only delivery-based trades.
These measures prevent speculative trading and ensure that NRI participation remains safe and transparent.
2. Recent Reforms – 100% NRI Participation via GIFT City
In June 2024, SEBI made a significant change: allowing 100% combined participation by NRIs, OCIs (Overseas Citizens of India), and Resident Indians in Foreign Portfolio Investors (FPIs) based in GIFT City (Gujarat International Finance Tec-City).
Two participation routes are available:
Route 1 – Requires full documentation (PAN, economic interest disclosure, etc.).
Route 2 – Allows investment with lighter documentation but with specific conditions like at least 20 investors and no single investor holding over 25%.
This reform makes it easier for NRIs to channel large investments through regulated FPI structures.
3. Digital KYC and Simplified Access
Recognizing how difficult KYC procedures were for overseas Indians, SEBI announced in October 2025 that digital KYC for NRIs is a top priority.
The new system — developed jointly with RBI and UIDAI — allows NRIs to complete KYC through video calls and digital documentation, eliminating the need to travel to India. This will make investment entry much simpler for the 3.5 crore NRIs worldwide.
Multi-Level Investor Protection
SCORES – SEBI’s Complaint Redressal System
The SCORES (SEBI Complaint Redressal System) is the heart of SEBI’s investor protection. Launched in 2011 and upgraded to SCORES 2.0 in 2024, it lets investors file and track complaints online against listed companies, brokers, or intermediaries.
Companies must respond within 21 days of receiving a complaint.
Investors can request a First Review within 15 days and a Second Review with SEBI if still unsatisfied.
In March 2025 alone, SEBI handled over 4,300 complaints with an average resolution time of just eight days.
The platform also integrates Online Dispute Resolution (ODR), allowing complex issues to be settled digitally.
Cybersecurity and Digital Protection
SEBI has built a strong Cybersecurity and Cyber Resilience Framework (CSCRF) to protect digital transactions.
Every stock exchange and depository must:
Run Security Operation Centers (SOCs)
Conduct vulnerability tests
Maintain incident response teams
SEBI monitors over 1,600 crore messages daily, identifying suspicious trades and potential fraud through predictive data systems. Regular stress tests and recovery drills ensure the system remains resilient and secure.
Investment Limits and Compliance Framework
To prevent market manipulation, SEBI has strict investment limits under PIS:
5% limit per NRI per company
10% total NRI limit, extendable to 24% with approval
Companies nearing these limits are added to a caution list (at 8%) or watch list (at 10%), restricting further NRI investments.
Documentation is equally strict — banks must report daily PIS transactions to the RBI, and investors must submit contract notes and PAN or passport details for verification.
Taxation and Repatriation
SEBI coordinates with tax authorities to ensure TDS (Tax Deducted at Source) on capital gains.
Short-term capital gains (under one year) are taxed at normal rates.
Long-term gains enjoy lower rates.NRIs can also benefit from Double Taxation Avoidance Agreements (DTAA) to avoid being taxed twice.
For repatriation:
Investments through NRE accounts can be fully repatriated abroad.
NRO account investments allow up to ₹8.3 crore ($1 million) repatriation per financial year after taxes.SEBI even permits forward contracts for currency hedging, helping NRIs manage rupee fluctuations.
Future Outlook and Digital Reforms
SEBI is simplifying FPI registration into a single online portal, reducing time and paperwork. The regulator also launched digital tools such as:
Investor Risk Reduction Access Platform
Unified Investor App
These allow NRIs to view holdings, vote electronically, and track grievances — all from anywhere in the world.
Alignment with Global Standards
SEBI’s investor protection system follows international best practices, including cybersecurity standards from the US SEC, UK FCA, and NIST frameworks.
By ensuring strong oversight, quick grievance resolution, and transparent limits, SEBI’s approach now rivals global financial hubs like Singapore and Hong Kong.
How NRIs Can Start Investing Safely
A step-by-step path:
Choose a bank authorized for PIS.
Open an NRE or NRO account based on repatriation needs.
Link it with your demat and trading account.
Complete KYC digitally.
Trade only through your designated bank.
NRIs should also:
Keep proper records and tax certificates.
Check company limits before investing.
Use currency hedging if investing large amounts.
Conclusion
SEBI has built one of the most reliable systems in the world to protect NRI investors. Through policies like the Portfolio Investment Scheme, SCORES grievance platform, cybersecurity framework, and digital KYC, it ensures every investment is secure, transparent, and well-regulated.
Recent initiatives — like 100% NRI participation in GIFT City FPIs and remote digital KYC — highlight SEBI’s mission to make Indian markets more accessible while maintaining strict compliance.
As India receives record remittances of ₹11.24 lakh crore, SEBI’s multi-layered protection guarantees that NRIs can confidently invest in their homeland’s growth story.
With continued reforms and technology-driven protection, India’s capital markets are truly becoming a safe and attractive destination for global Indian investors