NRIs who want to buy and sell shares listed on Indian stock exchanges — as opposed to mutual funds, which don't require this — have historically had to route those trades through the RBI's Portfolio Investment Scheme (PIS), a designated-bank-branch mechanism that lets the RBI track and cap aggregate foreign/NRI ownership in Indian-listed companies in something close to real time. A separate, non-PIS route exists for NRO-funded, non-repatriable equity investing. The two aren't interchangeable, and using the wrong one for your situation can create compliance headaches later, not just a suboptimal setup.
The PIS route: NRE-linked and repatriable
Under PIS, an NRI opens a designated PIS account linked to their NRE savings account at an RBI-authorized bank, and gets a PIS permission letter that lets a specific demat/trading account route delivery-based equity trades through that one designated bank branch. Because the funding sits in an NRE account, gains and sale proceeds under this route are generally repatriable, which is the main reason NRIs choose it over the alternative. Every PIS trade is reported by the bank to the RBI, which is how the regulator monitors sector-wise and company-wise foreign shareholding caps.
The non-PIS route: NRO-funded, non-repatriable
The non-PIS route lets an NRI invest in listed Indian equities using NRO funds without going through the PIS permission/reporting mechanism, but the funds and proceeds are tied to the NRO account's non-repatriable-by-default character (subject to NRO's own repatriation ceiling, covered elsewhere on this site). Non-PIS is also generally the route for secondary-market transactions PIS doesn't cover in the same way, and it does not require the same designated-single-bank-branch routing that PIS does. Mutual fund purchases and IPO applications, notably, sit outside the PIS framework entirely regardless of which account funds them.
Treat the current rule status as a moving target
PIS requirements have changed more than once over the past several years — including adjustments to individual and aggregate foreign-investment ceilings on listed companies, and periodic simplification of the permission and reporting process — and this is genuinely one of the more fluid areas of NRI-facing RBI/FEMA regulation. Don't treat any specific procedural detail (which trades require PIS routing, what the current ownership caps are, whether a given broker's non-PIS product still requires a separate NRO sub-account) as settled without confirming it directly with your bank's NRI desk or a current RBI/FEMA circular — the mechanics described here are the structural distinction between the two routes, not a guarantee that today's procedural specifics match what's written above.