The Securities and Exchange Board of India (Sebi) has proposed significant 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. According to reports from Mint, 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 proposed changes could make Indian markets more accessible to investors living abroad by reducing the need for physical paperwork and in-person visits. As per Firstpost, the existing digital onboarding process creates difficulties because intermediaries are required to capture the investor's location within India, which the proposed change would remove for eligible overseas investors.
To prevent fraud, the proposed changes include liveness checks, facial matching and live GPS capture that matches the investor's overseas proof of address. As reported by Mint, 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 regulator's consultation paper aims to reduce the time, cost and paperwork involved in opening investment accounts while making digital onboarding the default route for overseas investors.
Currently, overseas working professionals attempting to open a demat account from abroad often face significant delays during video verification because compliance systems detect overseas GPS locations. According to Sidhant Agarwal, chartered accountant and co-founder of India for NRI, cited by Mint, this forces investors to postpone account activation until their next trip to India. Under the new proposal, overseas investors would be able to complete digital verification, reducing account activation time to just one or two days and eliminating expensive physical couriers and repeated paperwork. As per Firstpost, an investor may have to provide documents, complete verification and send forms through international couriers, which can take weeks. Sharad Chand, Business Head - Wealth Management at Alankit Limited, noted that today, an NRI may be interested in Indian equities or mutual funds but abandon the process because of documentation, physical-presence requirements, verification and the back-and-forth involved with intermediaries. The digital KYC process could potentially boost foreign investment and crypto/DeFi adoption by making Indian markets more accessible to investors living abroad, though actual inflows will depend on market valuations, rupee movements and regulatory clarity.
The proposed changes have received strong support from industry experts who believe they could significantly increase NRI investment flows. Zerodha founder and CEO Nithin Kamath told Firstpost that easier onboarding could bring more NRI money into Indian markets, noting that by removing all this friction, this investor base can easily be many times larger. Kamath emphasized that foreign money flowing into India can have wider benefits for the country, including supporting the rupee. Sharad Chand highlighted that the proposal addresses a practical problem rather than an investment one, stating that for an investor sitting in Dubai, Singapore, London or the US, the decision to invest in India may be straightforward; what has historically been cumbersome is getting through the account-opening and KYC process. However, experts caution that the change alone will not lead to a sudden flood of money, as there are several other factors that determine NRI investment decisions, including tax rules, foreign exchange regulations, investment limits, banking arrangements, and market performance. Tushar Bopche, Co-Founder and CEO of InvestValue, noted that India is moving towards a potential $7.3 trillion economy by 2030, creating a much larger wealth-creation opportunity for both domestic and global Indians.
While the consultation paper represents a significant step toward simplifying NRI investment onboarding, experts emphasize that easier KYC is only the first step in making the entire NRI investment journey digital. Chand noted that the real opportunity is to make the entire NRI investment journey digital, not merely the first KYC step, meaning making KYC information easier to use across different financial companies and products. Vaibhav Laddha, CEO of Grip Invest, highlighted that regulatory restrictions continue to limit NRI participation in several categories of debt and hybrid securities available to domestic investors, suggesting India could consider gradually expanding products available to NRIs while maintaining safeguards. Loveena Kansal, EVP- Business Head at MegaCorp, stressed that the government and regulators would eventually need to simplify other parts of the process as well, including taxation, repatriation and compliance, stating that the real opportunity is to move from merely making NRIs eligible to invest to making investing in India as frictionless for them as it is for a domestic investor. For now, NRIs should continue to follow existing rules, as SEBI's proposal is still being discussed and could change before it becomes final.
