Reserve Bank of India moves to stop foreign forex brokers

It's no secret that retail forex trading is quite popular in India although, like in China, it is also illegal. Online spot trading is permitted only at a handful of brokers and currencies but this doesn't bother foreign brokers from entering this market and soliciting local clients, after all it's very profitable...

It seems that Reserve Bank of India had enough of it - it's both illegal and harms one of its core businesses - therefore it issued a warning to credit card processors. 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 Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term 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) Know Your Customer (KYC) Know Your Customer (KYC) is the process via which the broker is verifying the true identity of its clients in order to comply with multiple regulations. KYC is used to assess the suitability of customers when it comes to anti-money laundering regulations, any type of financial fraud and determining whether they are potentially risky for the brokerage.In particular, KYC guidelines in financial services mandate that individuals make a cohesive effort to verify the identity, suitability, and risks Know Your Customer (KYC) is the process via which the broker is verifying the true identity of its clients in order to comply with multiple regulations. KYC is used to assess the suitability of customers when it comes to anti-money laundering regulations, any type of financial fraud and determining whether they are potentially risky for the brokerage.In particular, KYC guidelines in financial services mandate that individuals make a cohesive effort to verify the identity, suitability, and risks Read this Term) norms and Anti Money Laundering (AML) standards, the circular added.

Will it stop any foreign forex brokers from operating in India? Take a guess.