NRI and OCI Operational Checklist After FEMA 395(4)/2026-RB: Designated Accounts, NPS Modes, Sale Proceeds

✍️ RebaseNest Team · Last updated 21 Jun 2026

·10 min read
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Assuming you are an NRI or OCI with a PIS-linked NRE account, a couple of equity SIPs running through an Indian platform, an old NRO bucket for rent and dividends, and somebody in the family asking whether you can now put NPS contributions from the NRO instead of doing the inward-remittance dance every quarter. You have heard the headline "RBI eases investment rules for NRIs and OCIs" but you cannot tell from the news copy what changed for you, what is the same, and what you actually have to do at the bank.

The short version is that the RBI's Foreign Exchange Department notified the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) (Amendment) Regulations, 2026 on 13 June 2026 as Notification No. FEMA. 395(4)/2026-RB. It was published on the RBI website on 15 June 2026 (file size 180 kb). It rewrites Schedule III of the principal regulations (which is the schedule that governs the payment and remittance language for NRI/OCI repatriable equity, mutual funds and NPS) and Schedule XI (Indian companies listed on International Exchanges). It does not change ownership ceilings, residency tests, or income-tax treatment.

The rest of this post is the operational checklist of what changes at the AD bank counter.

  1. The designated repatriable rupee account.

Under the substituted Schedule III, A. Mode of Payment, sub-clause (2), the regulation now says that a repatriable rupee account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016 shall be designated by an individual person resident outside India and the same shall be used exclusively for investments permitted under this Schedule.

Practically:

What it means Pick one NRE rupee account at one AD bank What it is for Schedule III equity, MFs and NPS (repatriable basis) only What it is not for Routine family remittances, household expenses, FD parking Who designates The NRI/OCI account holder, via the AD bank's form

The exclusivity language is the operative change. AD banks have for years opened multiple NRE accounts per customer with overlapping use cases. The amendment now reads on its face like the regulator wants the investment money path cleanly separated from the lifestyle money path. The point of the cleaner separation, at least the way most AD banks will operationalise it, is to make the LEC (Individual Foreign Investor - IFI) reporting trail (the renamed reporting form under sub-regulation (9) of Regulation 4) reconcile in one place instead of three. From the investor side, the practical sequence is to confirm with the AD bank which existing NRE the bank will treat as the designated investment account, and to keep that account ring-fenced from non-investment debits.

  1. NPS subscription: the NRO is now in the list.

The biggest functional change in the amendment, and the one most retail NRI/OCI investors will notice, is in Schedule III, A. Mode of Payment, sub-clause (3). The new wording: subscription to National Pension System by NRIs/OCIs shall be paid as inward remittance from abroad through banking channels or out of funds held in any repatriable foreign currency or rupee account or NRO account, maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

Three sources are now permitted:

Source Status under new sub-clause (3) Inward remittance from abroad Permitted (unchanged) Repatriable FC or rupee a/c Permitted (FCNR / NRE) NRO account Permitted (explicit in 2026 substituted text)

The substituted sub-clause makes the NRO route explicit in the 2026 wording. Either way, NRIs and OCIs who have rental income or post-tax dividends sitting in NRO can rely on the substituted text without first repatriating through the FEMA limits (USD 1 million per financial year for NRO repatriation under FEMA 13(R)/2016-RB) to route money into NPS via an NRE leg. The funding tap reads clean on the FEMA-side mode-of-payment rule.

A couple of things this does not do. It does not change the PFRDA eligibility, KYC, or tier rules for NPS. It does not change how the eventual NPS exit (lump sum + annuity) is taxed in India or in the country of residence. And it does not change the residency status of the NPS account if the subscriber's status changes later: that flows from PFRDA's own framework, not from a FEMA mode-of-payment rule. The funding tap is wider; the rest of the plumbing is unchanged.

  1. Sale proceeds: where the money can land.

Under B. Remittance of sale proceeds in the substituted Schedule III, the language is now:

(1) The sale proceeds (net of taxes) of equity instruments may be remitted outside India or may be credited to designated rupee account of the person concerned. (2) The sale proceeds (net of taxes) of units of mutual funds and subscription to National Pension System by NRIs/OCIs may be remitted outside India or, may be credited to any account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016 at the option of the NRI/OCI investor.

There are two operative distinctions:

Instrument sold Where proceeds can land Equity instruments Outside India OR designated repatriable rupee a/c MF units, NPS proceeds Outside India OR any FEMA Deposit Regs account, at investor option

For equity, the destination on the domestic leg is the designated account from section 1 above. That preserves the audit trail the LEC (IFI) reporting depends on. For mutual fund redemptions and NPS exit proceeds, the regulation gives the investor optionality across accounts maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016, which in practice includes NRE, NRO, and FCNR (the RFC account is a resident-status account governed by the same Deposit Regulations and is the relevant landing destination only post-redesignation on return). The flexibility is real, but it cuts both ways: parking MF sale proceeds in an NRO account that is later used for ordinary domestic spend can complicate the eventual paper trail if the investor later wants to repatriate the underlying gain. Intentional routing is the operative consideration.

  1. What did not change in this notification.

Three categories of rule are sometimes folded into the news framing of this amendment, none of which the notification itself touches:

Item Status Individual/aggregate equity-holding caps Unchanged; sits in NDI Rules Sch III USD 1 mn/FY NRO repatriation cap Unchanged; sits in FEM (Remittance of Assets) Regs Residential-status redesignation timing Unchanged; sits in RBI MD on Deposits NPS tier rules / withdrawal taxation Unchanged; PFRDA + Income-tax Act DTAA tie-breaker treatment of NPS Unchanged; treaty-specific

Reading the operative paragraphs of the notification side by side with the news framing makes this clearer. The amendment is a mode-of-payment cleanup with one substantive widening on the NPS funding tap. It is not a holdings-limit change, not a residency-rule change, and not a tax change. The 5 June Governor's Statement on equity-investment limits is a separate item; the corresponding NDI Rules amendment had not been gazetted as of the morning of 21 June 2026 per the RBI FEMA notifications page.

  1. Pre-built mistakes to step around.

A few that AD-bank relationship managers and CAs are likely to see in the first few weeks of operating the amendment:

  • Designating an NRO account as the Schedule III investment account. The notification's sub-clause (2) is specific: a repatriable rupee account. An NRO is non-repatriable on the principal side and does not qualify as the designated account, even though sub-clause (3) lets the NRO fund NPS specifically. Two distinct purposes, two distinct accounts.
  • Treating the new NPS sub-clause as a permission to fund regular equity SIPs from NRO. It is not. The NRO source is permitted only for NPS subscription under sub-clause (3), not for the broader Schedule III equity or MF investments under sub-clause (1).
  • Reading "may be remitted outside India" as a fresh permission. The notification preserves remittance optionality that was already there; it does not relax the underlying KYC or AML scrutiny the AD bank applies before processing an outward leg.
  • Assuming the operational effective date is the notification date. Paragraph 1(ii) ties the effective date to publication in the Official Gazette. Most AD banks will not reflect the change in their account-opening or designation workflows until the corresponding A.P. (DIR Series) circular is also issued.
  • Acting on the 5 June Governor's Statement on equity-investment limits as if it were already in force. The Governor's Statement signalled the direction; the operational change moves when the NDI Rules amendment and the AP DIR circular land, not before.
  1. The minimum checklist at the AD bank counter.

The shortest version of what an active NRI/OCI investor's operational picture looks like after this amendment is gazetted:

  • One NRE rupee account at one AD bank is identified as the designated repatriable rupee account for Schedule III investments, with the AD bank notified in writing or via its designated form.
  • Where the same account was previously also being used for routine family remittances, a second NRE for the non-investment flow is opened to preserve the exclusivity language of sub-clause (2).
  • Where NPS contributions are part of the plan and the source money sits in NRO, the AD bank confirms in writing the date from which it will accept NRO-funded NPS subscription per the substituted sub-clause (3).
  • For ongoing equity SIPs, the standing instruction is reconciled against the designated account rather than a different NRE.
  • For pending MF redemptions, the destination account is chosen against the substituted Schedule III, B(2) optionality, with the AMC/transfer agent instructed accordingly.
  • For the broader investment limits announced on 5 June, the operational circular landing on the RBI website is the trigger for any portfolio reshape; the underlying NDI Rules amendment had not been gazetted as of the morning of 21 June 2026.

The amendment is not a strategic shift. It is a piece of operational hygiene that finally aligns the FEMA-side mode-of-payment language with how AD banks have been informally running NRI/OCI accounts for years, with the one substantive widening on NPS funding. Most of the value of reading the notification carefully is the audit trail it forces, not new returns it unlocks.

A note on what this is. This article is one returnee's working notes, not personalised advice. Numbers age. Rules change. The only person who can sign off on your specific case is a qualified cross-border chartered accountant looking at your full facts. Use this as a checklist of questions to take to that conversation, not as the answer.

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