Can NRIs invest in India without flying back? Sebi’s KYC plan

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The Securities and Exchange Board of India (Sebi) has proposed changes to digital Know Your Customer (KYC) rules for Persons Resident Outside India (PROIs), including Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs) and eligible foreign nationals, in a move that could remove a key hurdle in investing in India from overseas.

The regulator's consultation paper, issued on 14 August, seeks to eliminate the requirement for overseas investors to be physically present in India during digital onboarding. If implemented, investors in FATF-compliant countries such as the US, UK, Japan, Canada, Germany and Australia could complete the entire KYC process remotely through web apps, video in-person verification (VIPV) and e-signed forms.

The proposal could reduce the time, cost and paperwork involved in opening investment accounts, while making digital onboarding the default route for overseas investors.

To prevent fraud, intermediaries will use liveness checks, facial matching and live GPS capture that matches the investor's overseas proof of address. Sebi has also proposed making KYC records portable across Sebi-registered intermediaries and expanding the list of certifying authorities to include officials at overseas branches of Indian banks.

The proposed changes could potentially reduce expenses and delays for investors, according to Sidhant Agarwal, chartered accountant and co-founder of India for NRI.

Currently, an overseas working professional attempting to open a demat account from abroad often gets blocked during video verification because the compliance system detects an overseas GPS location. This forces the investor to postpone account activation until their next trip to India.

Under the new proposal, overseas investors from their home would be able to complete digital verification, reducing account activation time to just one or two days. This also eliminates expensive physical couriers and repeated paperwork, he said, citing a few other cases where the proposed norms cut easier pathways.

Citing more scenarios where the proposed norms create easier pathways, Agarwal highlights how portable KYC and remote onboarding could resolve other pain points.

For instance, an NRI in Dubai expanding their portfolio across a broker, multiple mutual fund houses and a portfolio management service (PMS) currently has to redo the entire KYC procedure with fresh notarization and paperwork for every single intermediary. Under the proposal, a single verified digital KYC record would work across all entities, activating new accounts seamlessly.

Similarly, in estate settlements, such as US-based heirs inheriting shares in a late NRI parent's Indian demat account, the new process would allow them to fulfil client KYC requirements remotely. Matching GPS coordinates to their overseas address eliminates the need for physical presence, cutting time and cost.

While the consultation paper is a welcome move that can significantly ease onboarding for NRIs, OCIs and foreign nationals investing in India, Harshal Bhuta, partner at P. R.