Many Indian investors get attracted to advertisements on internet showing way of extra income by trading in forex market. And some people use their credit card for online payment to their forex account to start trading. But is it legal to do forex trading in India? The answer is clearly No.

Amid introduction of illegal online forex trade by certain companies, the Reserve Bank has asked credit card issuing companies to not permit payments for such transactions.

The regulations under Foreign Exchange Management Act (FEMA), 1999, do not permit resident Indians to trade in foreign exchange in domestic or overseas markets.



The RBI’s instruction comes in the wake of introduction of overseas foreign exchange trading on a number of Internet and electronic trading portals, luring the residents with offers of guaranteed high returns based on such forex trading.

Several people have lost heavily in forex trade through Internet portals in the recent past.

“The advertisements by these Internet or online portals exhort people to trade in forex by way of paying the initial investment amount in Indian rupees,” the RBI said.

Many companies even engage agents who personally contact gullible people to undertake forex trading and investment schemes and entice them with promises of disproportionate or exorbitant returns, the RBI said.

Such companies ask public to make the margin payments for such online forex trading transactions through credit cards or deposits in various accounts maintained with banks in India, the RBI said.

“…the card issuing companies who may also be advised to remain alert against permitting payments for such unauthorised transactions,” the central bank said.

The apex bank said it has also observed that accounts are being opened in the name of individuals or proprietary concerns at different bank branches for collecting the margin and investment money.

The banks have been asked to exercise “due caution and be extra vigilant” in respect of the such transactions, the RBI’s circular said.

Any resident Indian collecting or remitting such payments outside India is liable to be proceeded against with, for contravention of FEMA and violation of regulations relating to Know Your Customer (KYC) norms and Anti Money Laundering (AML) standards, the circular added.

Below is the exact notification from RBI on it.

RBI/2011-12/262
A.P. (DIR Series) Circular No. 46

November 17, 2011

To,

All Authorised Dealer Category I Banks

Madam/ Sir,

Overseas forex trading through electronic / internet trading portals

Attention of the Authorised Dealer Category – I (AD Category – I) banks is invited to A.P. (DIR Series) Circular No. 53 dated April 07, 2011 wherein AD Category I banks were advised to exercise due caution and be extra vigilant in respect of the margin payments being made by the public for online forex trading transactions through credit cards / deposits in various accounts maintained with banks in India. Further, AD Category-I banks were also advised to exercise due caution in respect of the accounts being opened in the name of individuals or proprietary concerns at different bank branches for collecting the margin money, investment money, etc. in connection with such transactions.

2. It has been observed that overseas foreign exchange trading has been introduced on a number of internet /electronic trading portals luring the residents with offers of guaranteed high returns based on such forex trading. The advertisements by these internet / online portals exhort people to trade in forex by way of paying the initial investment amount in Indian Rupees. Some companies have reportedly engaged agents who personally contact people to undertake forex trading/ investment schemes and entice them with promises of disproportionate / exorbitant returns. Most of the forex trading through these portals are done on a margining basis with huge leverage or on an investment basis, where the returns are based on forex trading. The public is being asked to make the margin payments for such online forex trading transactions through credit cards / deposits in various accounts maintained with banks in India. It is also observed that accounts are being opened in the name of individuals or proprietary concerns at different bank branches for collecting the margin money, investment money, etc. It is again reiterated that AD Category – I banks should exercise due caution and be extra vigilant in respect of the transactions that require residents to make margin payments for online forex trading transactions through credit cards / deposits in various accounts maintained with banks in India. It is clarified that any person resident in India collecting and effecting / remitting such payments directly /indirectly outside India would make himself/ herself liable to be proceeded against with for contravention of the Foreign Exchange Management Act (FEMA), 1999 besides being liable for violation of regulations relating to Know Your Customer (KYC) norms / Anti Money Laundering (AML) standards.

3. AD Category – I banks may bring the contents of this Circular to the notice of their constituents and customers concerned. Authorised Dealers may also give wide publicity to the instructions contained in the A.P. (DIR Series) Circular No. 53 dated April 07, 2011 and the Press Release issued by the Reserve Bank dated February 21, 2011 (copy enclosed). The instructions contained in this circular may also be brought to the attention of the card issuing companies who may also be advised to remain alert against permitting payments for such unauthorized transactions.

4. The directions contained in this circular have been issued under sections 10(4) and 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Meena Hemchandra)
Chief General Manager-in-Charge

 You may download this notification of RBI from here.

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https://www.investmentkit.com/articles/wp-content/uploads/2012/02/illegal-tax.jpghttps://www.investmentkit.com/articles/wp-content/uploads/2012/02/illegal-tax-150x150.jpgAdminForexadvertisements,apex bank,Auto,bank,banks in india,caution,Draft,extra income,fema,foreign exchange management,foreign exchange trading,forex,illegal check,income,India,indian investors,indian rupees,investment,market,notification,online,RBI,trade,wayMany Indian investors get attracted to advertisements on internet showing way of extra income by trading in forex market. And some people use their credit card for online payment to their forex account to start trading. But is it legal to do forex trading in India? The answer is...Educating Investors