RBI's New FEMA Rule: NRIs Can Now Use Repatriable Rupee Accounts to Invest in India
RBI has reformed FEMA rules to allow NRIs and OCIs to use designated repatriable rupee accounts for investing in Indian financial markets. Here is what changed and what it means for NRI investors.
The Reserve Bank of India has amended the Foreign Exchange Management (Non-Debt Instruments) Rules to introduce a new account category for NRIs and OCIs: a designated repatriable rupee account specifically designed for investing in Indian financial markets.
The change is procedural, not revolutionary. NRIs could already invest in Indian equities, mutual funds, and bonds. What the reform does is clean up the plumbing — creating a purpose-built investment account that is freely repatriable and separate from general banking accounts, reducing the compliance friction that has historically made NRI investment in India more cumbersome than it should be.
The 30-second answer: RBI has created a new designated repatriable rupee account under FEMA specifically for NRI and OCI investment in Indian capital markets. It works like an NRE account (freely repatriable, no $1 million annual cap) but is purpose-built for investment flows — dividends, redemptions, and capital gains from Indian equities, mutual funds, and bonds. For NRIs who actively invest in India, this creates a cleaner structure: banking in NRE/NRO, investing through the new dedicated account. RBI is also rolling out simplified digital PIS onboarding from June 2026, cutting the 2-3 week account opening wait to a few days. Combined with the recently doubled NRI individual investment ceiling (10% of a listed company, up from 5%), this is a meaningful improvement in India's NRI investment infrastructure.
Why this reform matters: the old friction
To understand what changed, it helps to understand the old process.
An NRI wanting to buy shares on the NSE or BSE had to open a Portfolio Investment Scheme (PIS) account, designated under the old FEMA rules as either repatriable (linked to NRE account) or non-repatriable (linked to NRO account). The distinction mattered because:
Repatriable investments (NRE route): Sale proceeds and capital gains could be freely sent abroad. But the funding had to come from foreign remittances — you could not deposit India-source income (rent from an Indian property, for example) into an NRE account and then invest it through PIS.
Non-repatriable investments (NRO route): India-source income could fund the investment, but repatriation of proceeds was capped at $1 million per financial year and required Form 15CA/15CB filing for each outward transfer — a bureaucratic process that takes days and requires a chartered accountant.
Many NRIs ended up with a messy split: repatriable PIS account for foreign-funded equity investments and an NRO PIS account for India-income funded investments, with separate tax treatment and repatriation processes for each.
The new designated repatriable rupee account simplifies this. It is a single purpose-built account for investment activity, freely repatriable like an NRE account, but designed to accept investment-related flows regardless of their source within the FEMA framework.
What NRI investors can do now
Cleaner investment account structure. Ask your bank (HDFC, ICICI, SBI, Kotak, Axis) when they will launch the new designated investment accounts. Most major banks are expected to introduce these within 60-90 days of the RBI circular. Once available, you can migrate your PIS activity to the dedicated account while keeping your NRE account for general banking.
Simplified repatriation of investment proceeds. Under the new structure, dividends received on Indian shares, redemption proceeds from mutual funds, and capital gains from property or equity sold can flow into the designated account and be repatriated without the $1 million cap or Form 15CA/15CB requirement. This is particularly useful for NRIs who have been accumulating Indian equity over many years and want to repatriate proceeds in retirement.
Digital PIS onboarding. RBI's simultaneous announcement of simplified digital PIS onboarding is arguably the more immediately useful change. The PIS account opening process — which has historically required physical documents, branch visits or courier, and weeks of processing — is being moved to a fully digital flow. Several banks have already piloted this; expect broad rollout by August 2026.
The investment limit increase: recap
Separately from the FEMA account reform — but announced around the same time — RBI has doubled the individual NRI investment ceiling in listed Indian companies from 5% to 10% of paid-up capital, with the aggregate NRI+OCI cap raised from 10% to 24%. This is relevant for NRI investors who hold or want to hold significant positions in individual Indian companies. Under the old 5% limit, large NRI investors (or NRI-managed family offices) could hit the ceiling in mid-cap and small-cap companies. The 10% limit provides substantially more room.
Tax treatment: what does not change
The FEMA reform does not change the income tax treatment of NRI investments. Tax rules are governed by the Income Tax Act, not FEMA. The key tax points remain:
Equity capital gains: Long-term gains on listed equity held more than 12 months are taxed at 12.5% (Section 115AD for NRIs, after the July 2024 Budget change). Short-term gains are taxed at 20%. TDS is deducted at source by the broker at these rates.
Dividend income: Dividends on Indian shares are taxed at 20% plus surcharge and cess for NRIs (or at the lower DTAA rate if Form 10F and a Tax Residency Certificate have been submitted to the broker).
Mutual fund redemptions: Equity mutual funds follow the same 12.5%/20% LTCG/STCG rates as direct equity. Debt mutual funds are taxed at slab rates (Section 50AA post-April 2023 change).
The repatriation of investment proceeds does not trigger an Indian tax event — tax is paid at the point of sale or dividend receipt. The FEMA account reform simply makes the mechanical process of moving money out of India cleaner.
The closing read
This reform will not make headlines the way an interest rate change or a Budget announcement does. But for NRIs who actively manage Indian equity portfolios and have been dealing with the split-account friction for years, it is a meaningful quality-of-life improvement. A single purpose-built repatriable investment account, digital PIS onboarding, and a doubled individual investment ceiling together represent the most coherent package of NRI capital market reforms in several years. If you have been deferring Indian equity investment because the account setup was too cumbersome, that excuse is now materially weaker.
Related reading
- SEBI FPI and NRI Investment Changes 2026
- NRE vs NRO vs FCNR: Which Account for Which Purpose
- NRO Account Repatriation and TDS
- Capital Gains Tax for NRIs on Shares and Mutual Funds
- DTAA India-US: How to Avoid Double Tax
- India Equity Market 2026 Outlook for NRIs
- FEMA Amendments 2026 for NRIs
- NRI ITR Filing: July 31 Deadline Checklist
Sources: RBI notification on FEMA (Non-Debt Instruments) Amendment Rules 2026; EduNovations, "RBI NRI Investment Rules 2026: Designated Repatriable Rupee Accounts Allowed for OCIs and NRIs Under FEMA Reform"; Business Standard, "RBI Widens FAR, Unveils Other Measures to Attract Foreign Capital"; Indian Eagle, "New RBI Investment Rules for NRIs, OCI Cardholders in 2026."
Disclaimer: FEMA rules and RBI circulars are updated periodically. Verify current account opening requirements with your bank before acting. This article is for general information only.
Frequently asked questions
What is the new RBI FEMA rule for NRI investment accounts and what does it change?
The Reserve Bank of India has amended the Foreign Exchange Management (Non-Debt Instruments) Rules to allow NRIs and OCIs to open and operate designated repatriable rupee accounts specifically for investing in Indian financial markets. Previously, NRIs investing in Indian equities, mutual funds, and bonds through the Portfolio Investment Scheme (PIS) had to route all transactions through their NRO (Non-Resident Ordinary) or NRE (Non-Resident External) accounts, with different tax and repatriation implications depending on which account was used. The new designated repatriable rupee accounts are purpose-built for investment — they allow funds to be freely repatriated abroad at any time, similar to NRE accounts, but are specifically designed for market investments rather than general banking purposes. The change reduces operational friction for NRIs who want to maintain separate investment accounts from their general banking accounts, and simplifies the compliance trail for PIS transactions.
How does the new FEMA repatriable account differ from NRE and NRO accounts for NRI investors?
The key differences are: NRE accounts are general-purpose and freely repatriable, but the source of funds must be foreign remittances — you cannot credit India-source income to an NRE account. NRO accounts accept India-source income (rent, dividends, pension) but repatriation is capped at $1 million per financial year after taxes and requires Form 15CA/15CB certification. The new designated repatriable rupee accounts occupy a middle ground: they are freely repatriable like NRE accounts but are designed to accept investment-related flows including dividends, redemption proceeds, and capital gains from Indian equity and bond investments. For NRIs with active Indian investment portfolios, this creates a cleaner structure: keep your banking in NRE/NRO accounts and use the designated repatriable investment account for all capital market activity. The practical benefit is fewer compliance touchpoints when repatriating investment proceeds — no $1 million cap, no Form 15CA/15CB requirement for each outward transfer.
Do NRIs still need a PIS account to invest in Indian equities after this FEMA change?
The Portfolio Investment Scheme (PIS) requirement for NRI equity investment in listed Indian companies remains in place. What the FEMA reform changes is the banking account that is linked to the PIS. Previously, the PIS account had to be linked to an NRE (for repatriable investments) or NRO (for non-repatriable investments) account. Under the new rules, a designated repatriable rupee account can serve as the linked account for PIS transactions. For most NRIs, the practical implication is that banks will begin offering dedicated investment accounts that are cleaner and easier to manage than using a general NRE account for both daily banking and share trading. RBI has also separately announced simplified digital onboarding for the PIS from June 2026, which should reduce the 2-3 week account opening timeline that has historically been a barrier for NRIs wanting to invest in Indian equities.
Rakesh Sinha, NRI Finance Writer
Rakesh Sinha is a technology professional and an NRI since 2016. He holds a master’s from Carnegie Mellon University and a BTech in Computer Science from IIT Guwahati, and has worked at Microsoft, Cisco, InMobi and Google across Bengaluru, the United States and London. He has personally navigated the decisions these guides cover: moving foreign salary and tech-company RSUs across borders, opening NRE, NRO and FCNR accounts, filing Indian returns as a non-resident, and claiming DTAA relief between the US, UK and India. How these guides are written and reviewed.
Disclaimer: This guide is educational and general in nature. It is not individual financial, tax, or legal advice. Tax and FEMA rules change and your situation may differ, so confirm specifics with a qualified chartered accountant or financial adviser before acting. See our editorial standards for how these guides are researched, reviewed and updated.