Besides limitations on forex trading, It is imperative to note that CFD platforms are also not considered legal in India. Traders cannot open leveraged positions in any case. Not to mention, India is not an exception to restrict forex trading in the country. There are more than twenty countries that hold strict regulations on currency trading.
Besides other reasons stated above, these countries seem to be following a common agenda of protecting their citizens from the evil forex losses. Forex trading through an online broker is a non-bailable offence in India. You could potentially face imprisonment following excessive financial penalties.
Forex Brokers & Individual Traders In India: Reports of RBI
The RBI has warned Indian citizens many times not to involve with any online forex broker. In a report published in 2011, the RBI claimed that several online forex brokers keep offering alluring returns to Indian clients. The report also mentioned that these brokers do not inform their clients concerning the legal status of forex trading in India. In a circular published by the Indian times, the RBI warned brokers/agents who contact Indian citizens and urge them to invest their money into forex to prepare themselves to face legal implications.
Although unregulated national and international brokers keep trying to establish their regional offices in India under different brand names, such as training schools, educational academies, or consultancy firms. However, most brokers barely exist for more than a few months to a couple of years. After legal authorities take action against them, they have to pack up and make their way out of the business. So far, the Indian government has cracked down on numerous illegal brokers in India.
Evidence of the Issue of the illegality of Forex Trading
In April 2011, a report published in Indian Express concerning the legality of forex trading in India revealed that the Indian Law enforcement agencies have raid five public and private sector banks and financial intermediaries involved in illegal forex trading.
RBI revelations of additional findings and action against fraudulent agents
The RBI keeps cautioning citizens to remain vigilant from time to time. A report was shared by the RBI, revealing that agents ask customers to deposit the marginal payments in their designated bank accounts. After receiving funds in their bank accounts, these fraudsters run away. That’s why RBI asks central banks to keep a check on such obnoxious bank accounts and report them to authorities after finding them immediately. The RBI has clarified multiple times that if anyone is caught in breach of conduct stipulated by the RBI amid forex trading, he/she would be penalized under the FEMA Act, 1999.
Forex Trading & Corporations
In India, only corporate institutes are allowed to trade forex on a conditional basis. One such condition is to use free U.S. Dollars for forex trading. The term free here represents those dollars that are not utilized from the forex reserves. Also, corporations can’t use the leverage of more than 1:10.