Mutual Fund NRI Investment

Mutual Fund NRI Investment in India & Things To Consider Before Investing in Mutual Funds | Assetmonk

Mutual funds are considered to be one of the most flexible investment options for NRIs. NRIs get many benefits and conveniences while investing in mutual funds through SIPs, or they can opt for growth or dividend options and claim the redemption proceeds whenever they wish to. 

Trends in Growth of Mutual Fund NRI Investment

NRIs usually invest in India, pass their hard-earned money in foreign currency to their families in India, build a financial asset in their hometown, and attain financial stability. They also look forward to building a corpus for their retirement age. They consider shifting back to their home country along with an anticipation of gaining higher returns on their investment for future savings.

Mutual Fund NRI Investment Trends


As of 2019, the small-cap mutual funds have shown a promising growth on their 3 years and 5-year return with 87% and 98% return growth respectively. The second most promising mutual fund is the mid-cap mutual fund that also garners most NRI investors’ attention.

NRI mutual fund investments are governed by the Foreign Exchange Management Act 1999, known as FEMA. As per FEMA, NRIs can invest in capital markets like mutual funds, direct stocks, and extended traded funds (ETFs).

So what has led to such an explosion of NRI investment in mutual funds? It is because:

  • As the Indian currency is cheaper than abroad, NRIs can easily invest in India without high financial cost.
  • The mutual funds in India provide a DTAA that helps in availing tax returns.
  • It is easier for NRIs to maintain mutual fund investments while they still live outside of the country.
  • NRI mutual fund investments also act as a doorway of NRI real estate investments. The corpus so generated with mutual fund return can be utilized by NRIs to purchase a real-estate property.

FEMA Terms and Conditions for NRI Mutual Fund Investment

NRIs need to follow certain terms and conditions laid down by the FEMA in any investment including mutual funds and these include regulations such as –

  • Complete the KYC process
  • In case of cheque payments, the NRI investors will have to have a foreign inward remittance certificate FIRC.
  • NRIs have to open a non-resident external rupee account NRE, non-resident ordinary rupee account NRO or foreign currency non-resident account FCNR. 
  • They can assign a power of attorney PoA to someone in India who can take care of their mutual fund decisions and real estate concerns. 
  • They can also have a joint account with a resident Indian who can further take care of the funds’ requirements. 
  • NRI and non-NRIs are liable for the same taxation rules. All the NRIs have to pay STCG G of 15% on equity funds while LTCG of 10% on long term debt funds. 

Documents Required for NRI Mutual Fund Investment KYC process are:

  • NRI’s PAN card
  • NRI’s passport and its valid photocopy
  • Evidence of NRI’s abroad residential address
  • A copy of NRI individual’s NRE/NRO/FDRC bank account

Things to Consider While Investing in Mutual Funds

For NRIs to invest in mutual funds, the usage of Indian currency is a must. Also, they should have an NRE or NRO account for investing in mutual funds in India. NRIs worldwide except Canadians and US NRIs can invest in India’s mutual funds to reap the growing Indian economy’s maximum benefits. However, FATCA rules restrict Canadian and US NRIs for investment in mutual funds except for a few specially classified AMCs for them.

When trying to invest in India in mutual funds, NRIs must also consider their financial goals and other pursuits for health insurance, emergency fund, life insurance, and retirement calls. Before investing in mutual funds, NRIs should either consult a financial advisor or go through the performance charts and a detailed analysis of special funds.

To Conclude

India is on the path of becoming the most sought after destination for investment for investors across the globe. Being the most favoured investment option, India attributes its favouritism to the growing popularity and effectiveness of Indian leadership, healthy institutional decisions, and calculated and improved Foreign Relations. A stable government, reforms, growing and improving economy with low inflation and interest rates, holds a promising future for the Indian economy. Therefore, investing in India is an excellent way for NRIs to create wealth and help in its growing economy. With a lot of FDI (Foreign Direct Investment) flowing into the country, the Indian market has immense scope for growth, and therefore everyone wants to take advantage of it.

NRIs usually invest in India, pass their hard-earned money in foreign currency to their families in India, build a financial asset in their hometown, and attain financial stability. They also look forward to building a corpus for their retirement age. They consider shifting back to their home country along with an anticipation of gaining higher returns on their investment for future savings.

Finally, quoting Warren Buffett, ‘An essential quality for an investor is to have a temperament, not intellect. It would help if you had the right temperament that neither derives great pleasure from being with the crowd or against the crowd’. Thus, a person’s thought process and a risk-taking attitude govern his or her investment pattern. The NRI investors can also reach out to Assetmonk for help regarding investment advice or purchase of real estate properties at lucrative options available throughout India.

Mutual Fund NRI Investment FAQ's:

The mutual funds could be held when the resident status changes. The process is as follows, first, the NRI shall write a letter to the AMCs along with proof of the NRI bank accounts, KYC details, verification documents, and address proof. Then the mutual fund units could be held when the resident status changes.

There is no assurance that one would not lose money in the mutual funds. However most often one would gain wealth in the long term, but in certain unfortunate circumstances one could even end up losing the majority of the money.  Mutual funds are handled by fund managers who invest the fund in a diverse variety of stocks and commodities. So, it’s a fact that not all of the mutual fund would fail so miserably that one loses all the money.

NRIs can invest in the mutual fund schemes, these are however subjected to certain provisions applicable under the Foreign Exchange Management Act. NRIs can easily invest on a repatriable or a non-repatriable option using funds from the NRO or NRE account.

Mutual funds could be a bad investment when the investors fail to consider the negative factors, such as the expense ratios of the fund, lack of proper control over the investment decisions, hidden front-end or back-end load charge, as well as diluted returns.

Any moment is the best moment to invest in mutual funds. One should remember to invest as per your financial goals and risk tolerance. And one Pro-tip is to invest in times when the market suddenly experiences a vibe of fear due to the continuous downfall of the market. Data says that Investing in such times often is considered to be the best moment to invest.

Upon comparing the risk factors, stocks happen to be way riskier than mutual funds. The overall risk in mutual funds always spread across and hence, reduced with the proper pooling of such diverse stocks. 

Yes, the option is to invest in overnight funds and are open-ended debt mutual fund options that invest in overnight securities with a maturity of a single day. It means that the fund manager purchases the securities daily.

NRIs who have chosen the online facility can apply for redemption online in the “Transact Online” section. Alternatively one can submit the redemption request at the nearest official point of acceptance of the transactions.

The custodian is a company representative who is responsible for the possession, managing, and safekeeping of the total securities bought by the mutual fund. However, monitoring the overall performance of the funds would help one to decide when to go in or exit a plan, and this would be the responsibility of the buyer too.

The NAV is disclosed daily in the case of open-end options and weekly in the case of close end options, this data would help an NRI to evaluate the fund’s performance. Studies relating to the mutual fund schemes are also published by the financial newspapers both online and regularly. Moreover, one would also get yearly reports of the fund report from the company in the last week of the year.

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