What is a Custodian Account?
A Custodian Account is a special type of account required by the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) for Non-Resident Indians (NRIs) who wish to trade in Futures & Options (F&O) or other derivative segments in the Indian stock markets.
A registered custodian acts as an intermediary between the NRI investor and the stock exchanges, ensuring regulatory compliance, secure handling of securities, and proper settlement of transactions.
Why Do NRIs Need a Custodian Account?
Regulatory Compliance
NRIs are not permitted to participate directly in F&O trading without a custodian, as per SEBI and RBI rules.
Transaction Oversight
Custodians authorize trades, maintain detailed transaction records, and report to regulatory bodies to ensure transparency and adherence to investment guidelines.
Margin and Fund Management
Custodians handle the required margins and funds for derivative trading, offering an additional level of control and security.
Repatriation and Settlement
They facilitate the lawful repatriation of profits and ensure proper trade settlements in accordance with Indian financial regulations.
How to Open a Custodian Account (for NRIs trading in F&O)
- Open a Trading Account: Begin by opening a Non-PIS NRO trading account with a broker that is authorized to work with SEBI-registered custodians (e.g., Firstock).
- Submit KYC Documents:
- PAN Card
- Passport
- Visa
- Overseas and Indian address proofs
- FATCA declaration
- Receive a Pre-filled Application: Your broker will assist you by providing a pre-filled custodian account application for ease of processing.
- Sign and Submit: Sign the application form and submit it as per instructions ( courier the Application form to Firstock).
- Account Activation: Once verified by the custodian, your account will be activated, allowing you to start trading in the F&O segments.
Important Points to Note
- A custodian account is mandatory only for trading in F&O or derivatives. It is not required for regular equity delivery trades.
- Funds for margin and settlement must be maintained in your linked NRO bank account.
- This account works alongside your Trading and Demat accounts; it does not replace them.
Conclusion
If you're an NRI aiming to trade in Futures & Options in India, opening a Custodian Account is a mandatory step. Brokers like Firstock simplify the process by offering support and guidance throughout the journey.
Start today by connecting with your broker or visiting https://nri.thefirstock.com for a smooth and compliant onboarding experience into India's dynamic F&O market.