All eyez on You: RBI hits out at FX related bank transfers

Indian regulators continue to reiterate their stance on online margin trading - No means No! The directives have been pushing through with general laws on sending funds for margin products to a clear statement earlier this year, followed by credit card clamp down.

The next move comes as the interest in India's thriving online trading environment is still buzzing.

The Reserve Bank today directed banks to exercise caution with respect to online Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term trading by Indian residents where 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 through a credit card or deposit are required in view of the risk of fraud.

"... 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," the Reserve Bank said in a notification.

The RBI said it has observed instances where overseas foreign exchange trading has been introduced on a number of internet and electronic trading portals, luring Indian 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," it said.

According to the RBI, most of the forex trading through such portals is 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 said.

The RBI warned that any person who is residing in India and engaged in collecting or remitting such payments either directly or indirectly abroad would be liable to face action as per the rules of the Foreign Exchange Management Act (FEMA) and other laws.

India's domestic futures market is growing with more retail participation taking place as firms like Alpari are running educational seminars across the country. Local brokers like Karvy and Angel Broking have also put their guard up and can see clients attraction to the liquid instruments.

Forexmagnates team published a detailed report on the history and developments of Forex in the Q2 report.

Click here to access your latest copy of the Forex Magnates Retail Forex Industry Report.