IPO NRI IPO rights issue FEMA NRE NRO

NRI IPO applications and rights issues

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A non-resident Indian (NRI) or an overseas citizen of India (OCI) may apply for an Indian initial public offering on a repatriable basis through a non-resident external (NRE) account or a non-repatriable basis through a non-resident ordinary (NRO) account, with the investment governed by the Foreign Exchange Management Act (Non-Debt Instruments) Rules 2019 and the offer governed by the SEBI (ICDR) Regulations 2018 . The same framework, and the same NRE-or-NRO choice, applies to a rights issue. This article sets out which account to use, when UPI ASBA is available to an NRI, what repatriable and non-repatriable mean in practice, and how an NRI takes part in a rights issue including the renunciation of rights entitlements.

The practical distinction that organises everything below is the account. An NRE account holds funds remitted from abroad and keeps the investment repatriable, so sale proceeds can leave India again. An NRO account holds Indian-source income, rent, dividends, a domestic salary, and keeps the investment non-repatriable, treated for most purposes as a domestic investment. The same person, holding the same PAN, can run both, but for any single IPO or rights issue they must choose one, because the PAN links the two accounts and a duplicate application under one PAN is rejected.

NRIs investing in market instruments should note that cross-border transactions are subject to FEMA and the applicable double-taxation-avoidance agreement; consult a financial adviser familiar with NRI taxation before acting on a large allocation.

Who may apply and through which account

An NRI or OCI applies for an Indian IPO through the NRE account for a repatriable investment or the NRO account for a non-repatriable investment, linked to the matching NRI demat. The choice is not free per issue: where an NRI holds an NRE demat, the application must run through the NRE bank account, and where the holding is non-repatriable, through the NRO account. Zerodha states the constraint plainly: an NRI may apply for an IPO from either the NRE or NRO account, but not both for the same issue, since the same PAN links both accounts. A second application breaches the one-application-per-PAN rule and both bids fall.

The retail limit applies to NRIs as it does to residents. An NRI bidding in the retail individual category is bound by the same Rs 2 lakh ceiling. The UPI ASBA mechanism covers an individual bid up to Rs 5 lakh, set by NPCI’s increase of the per-transaction UPI limit from Rs 2 lakh to Rs 5 lakh in December 2021; above that an NRI moves to the non-institutional category and net-banking ASBA. Read how to open a Zerodha NRI account for the account-opening route and the PIS versus non-PIS choice that sits behind all of this.

UPI ASBA availability for NRIs

NRIs can use UPI ASBA to apply for IPOs where the NRE or NRO account is UPI-enabled. This is a change from the earlier position, in which UPI was a resident-only rail and NRIs were confined to net-banking ASBA. NPCI required UPI participants to enable NRE and NRO accounts held with international mobile numbers, in a circular dated 10 January 2023 with a 30 April 2023 implementation deadline; the facility settles in Indian rupees only and places the FEMA and know-your-customer onus on the banks. Zerodha confirms the current position: if the NRE or NRO bank account supports UPI transfers, the NRI can apply for IPOs directly through Kite.

Implementation varies by bank, so the practical rule is conditional. An NRI whose bank has enabled UPI on the NRE or NRO account applies on Kite exactly as a resident would, approving a UPI mandate that blocks the application amount until allotment. An NRI whose account is not UPI-enabled uses net-banking ASBA from the NRE or NRO account, where the self-certified syndicate bank blocks the funds. Under both routes the money is blocked, not debited, and the debit happens only on allotment.

A separate issuer-level restriction is worth noting. Many IPOs bar applications from NRIs resident in the United States or Canada, for the issuer’s own securities-law compliance reasons. This is not a blanket SEBI rule; it is issuer-specific and stated in the red herring prospectus , so an NRI in those jurisdictions must check the offer document before applying.

Repatriable versus non-repatriable basis

The repatriable and non-repatriable distinction is the heart of the FEMA treatment and it follows the account.

A repatriable investment is made through the NRE account and falls under Schedule III of the FEMA (Non-Debt Instruments) Rules 2019. The funds came in from abroad, and the sale proceeds, net of taxes, may be remitted abroad again. This is the route for an NRI who wants the capital and the gains to be able to leave India.

A non-repatriable investment is made through the NRO account and falls under Schedule IV of the FEMA NDI Rules 2019. Crucially, an investment under Schedule IV is treated as a deemed domestic investment, on par with a resident’s, which simplifies the compliance and removes the FDI sectoral caps that bind repatriable foreign investment. The trade-off is that the proceeds stay within the NRO framework rather than being freely remittable. Certain sectors remain off-limits even on a non-repatriable basis: a Nidhi company, agricultural or plantation activity, the real-estate business, the construction of farm houses, and dealing in transferable development rights.

For the parallel treatment in mutual funds, which uses the same NRE and NRO logic, read NRI mutual fund investment on a repatriable basis and on a non-repatriable basis .

Rights issues for NRIs

A rights issue lets an existing shareholder buy new shares in proportion to their holding, and an NRI shareholder may subscribe on a repatriable or non-repatriable basis. Zerodha states that the process of applying for a rights issue is the same for NRIs and residents. The repatriability of the rights shares follows the basis of the original holding: rights shares against a repatriable holding are repatriable, and against a non-repatriable holding are non-repatriable. Read rights issue for the mechanics of the entitlement, the record date and the application window.

The rights entitlement (RE) itself is a tradable instrument. An NRI may renounce the entitlement, in full or in part, in favour of a resident or a non-resident, or acquire shares through a renunciation made to them. When a non-resident renounces to another non-resident, or a resident renounces to a non-resident, the pricing is governed by the FEMA pricing guidelines, restructured through Rule 7A introduced by the Foreign Exchange Management (Non-Debt Instruments) (Second Amendment) Rules 2020, notified on 27 April 2020. For a listed company the price on renunciation is determined by the company; for an unlisted company it must be not less than the price offered to residents. Read how to renounce a rights entitlement on Zerodha for the on-platform steps.

Reporting follows the FEMA rails. The issue of rights shares to a non-resident is reported in Form FC-GPR within 30 days through the authorised-dealer bank, under the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations 2019. The bank, not the investor, files the form, but the investor must supply the supporting details.

The PIS ledger and post-allotment reporting

An NRI who holds a portfolio investment scheme (PIS) account has an extra post-allotment step. After an IPO or rights allotment, the PIS account holder must raise a request with the broker and submit a bank annexure together with a bank statement showing the IPO or rights debit, so the bank updates the PIS ledger. The PIS ledger tracks an NRI’s repatriable secondary-market holdings under RBI monitoring, and an IPO allotment must be reflected in it. An NRI on the non-PIS route does not have this ledger-update step. Read Zerodha NRI PIS versus non-PIS account for which route applies and why most NRIs now choose non-PIS for new investments.

Regulatory basis

Two frameworks operate together. SEBI governs the offer and the market mechanics: the SEBI (ICDR) Regulations 2018 set the disclosure, pricing, subscription and allotment rules for both IPOs and rights issues, including the dematerialised trading of rights entitlements on the exchange. FEMA governs the cross-border dimension: the FEMA (Non-Debt Instruments) Rules 2019 set out Schedule III for repatriable and Schedule IV for non-repatriable NRI investment, and the FEMA pricing and reporting regulations cover renunciation pricing and Form FC-GPR. Tax sits on top of both: capital gains on an NRI’s allotment are taxed in India, often with TDS under Section 195 on redemption, subject to relief under the applicable DTAA .

See also

External references

References

  1. Foreign Exchange Management (Non-Debt Instruments) Rules 2019, Schedule III (repatriable NRI and OCI investment) and Schedule IV (non-repatriable, deemed domestic investment).
  2. Foreign Exchange Management (Non-Debt Instruments) (Second Amendment) Rules 2020, notified 27 April 2020, Rule 7A (pricing on renunciation of rights to a non-resident).
  3. Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations 2019 (Form FC-GPR reporting within 30 days).
  4. SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 (IPO and rights-issue framework, dematerialised rights entitlements).
  5. NPCI circular dated 10 January 2023 on UPI for NRE and NRO accounts with international mobile numbers (implementation by 30 April 2023); NPCI increase of the per-transaction UPI limit to Rs 5 lakh, December 2021.
  6. Zerodha support, NRI IPO and rights-issue application (NRE or NRO, not both; UPI where the account supports it; PIS ledger update after allotment; as of 21 June 2026).

WebNotes Editorial Team prepares factual reference material based on publicly available regulatory documents and broker disclosures. WebNotes is not affiliated with Zerodha Broking Limited. Cross-border transactions are subject to FEMA and applicable DTAA terms; consult a financial adviser familiar with NRI taxation before acting.

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Frequently asked questions

Can an NRI apply for an IPO in India?
Yes. An NRI or OCI may apply for an Indian IPO on a repatriable basis through an NRE account or a non-repatriable basis through an NRO account. The application uses the linked demat and the FEMA Non-Debt Instruments Rules 2019 govern the investment.
Can NRIs use UPI ASBA to apply for IPOs?
Yes, where the NRE or NRO account is UPI-enabled. NPCI extended UPI to NRE and NRO accounts held with international mobile numbers, so an NRI whose bank supports it can apply on Kite using a UPI mandate. If the account is not UPI-enabled, the NRI uses net-banking ASBA instead.
What is the difference between repatriable and non-repatriable IPO investment?
A repatriable investment is made through an NRE account, and the sale proceeds may be remitted abroad. A non-repatriable investment is made through an NRO account and is treated as a deemed domestic investment under Schedule IV of the FEMA NDI Rules 2019; the proceeds stay within India’s NRO framework.
Can an NRI apply through both the NRE and NRO account for the same IPO?
No. The same PAN links both the NRE and NRO accounts, so an NRI applies through one or the other for a given issue, not both. A second application under the same PAN, whether from the other account, causes both to be rejected at the registrar stage.
Does the Rs 2 lakh retail limit apply to NRIs?
Yes. An NRI applying in the retail individual category is bound by the same Rs 2 lakh limit as a resident retail applicant. The UPI ASBA mechanism covers individual bids up to Rs 5 lakh; a larger NRI bid moves to the non-institutional category and net-banking ASBA.
Can an NRI take part in a rights issue?
Yes. An NRI may subscribe to a rights issue on a repatriable or non-repatriable basis, with the same application process as a resident. The repatriability of the rights shares follows the basis of the original holding, and the rights entitlement may be renounced in favour of a resident or non-resident.
Can a US or Canada based NRI apply for any Indian IPO?
Not always. Many issuers restrict applications from NRIs resident in the United States or Canada for compliance reasons, so eligibility is issuer-specific and stated in the offer document. An NRI in those jurisdictions should check the red herring prospectus before applying.

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