Is forex trading illegal in india ? – forex trading in india :
Is Forex trading illegal in india ? this is one of the biggest question into indian investor mind. Forex market is a decentralized market which cannot operate from one place like indian nse and bse market, its 24 hours a day from monday to friday. indian Forex market is open from tokyo then sydney, move through the asia market, then europe and finally closed in u.s markets on friday.
In forex market there are more than 44 international currency pair traded on the foreign exchange. There are many companies who are dealing in foreign currency trading operated from india illegally.
What are the legal route of doing forex trading in india?
Legal route of doing forex trading in India is only register dealer. You can do forex trading with the help of registered sebi dealer. Authorized dealers list can be found from sebi website ( http://www.sebi.gov.in/) . There is also legal way for doing forex trading in India as indian exchanges like NSE, BSE and MSEI that provides opportunities to invest in forex trading in India.
You should beware of fake dealers who claim high return of your forex investment money. Their only intention is to get money form 10 to 15 investors and fund away by making fool. In this way, all the investor may have to suffer loses.
You have seen many advertisement of forex trading that claim very good return on investment. These advertisements create temptation in MIMD of investors. Then, many people investors invest in forex trading without having of knowledge of it. Forex trading is like a “black box” for small investors. They find themselves trapped into a big losses schemes. This leads to them at a conclusion that forex trading is a scam. It is not true. If you good knowledge of investment , then you earn high return. I have seen many people who are consistently earning 30 to 50% return on their investment.
Today, we are going to discuss about myths about forex trading that are prevailing across India.
1. Forex trading is the easiest Way to earn high return on investment:
Money does not grow at tree. If you are looking for a way to become rich overnight, then forex trading is not for you. However, it does not that you cannot earn high return in forex trading. It is totally depends on the knowledge of investors, how he can use his mind in investment. have seen many people who are earning high return at consistency basis.
2. Forex trading give sure return on investment:
It is one of the biggest myth of forex trading. You should think twice before investing your hard earned money. There is equal risk in forex trading as other investment instrument has. There are approx 90% investors who try their luck in forex trading without having basic investment knowledge of it. They have to suffer loses. These are the people who began to think that forex trading is a scam due to losses. They have to make effort in right direction to understand the market. Now, it is clear that forex trading does not provide sure return. You have to make some efforts like other business.
3. RBI allow forex trading with coordination of some brokers:
Today, you can see large number of online website that claim forex trading with approved RBI registration. You should beware of such kind of websites. According to RBI circular no. 53, dates 7 April, 2011, it is clarified that forex trading with online portal or digital portal are prohibited in India. It mean transfer money to a forex trading account with a broker who live abroad is violation of FEMA,1999.
Now, the question arises why it is illegal? As per the rbi guidelines indian citizen cannot send directly or indirectly fund to outside india for margin trading purpose. Rbi circular rbi/2013-14/265 a.p. (dir series) circular no. 46 stated that overseas forex trading through electronic or internet trading portals is not permitted in india. Rbi believes that any type of margin trading is speculative in nature and in every speculation business there is 90% risk of losing money. So, if any Indian trader who trades in foreign currency like ‘euro’ or ‘pound’ and if that trader loose the money then he has to purchase the dollar from rbi in order to pay the loss amount, this leads to reduction in foreign currency reserve. So, if everyone is trading outside india in foreign currency and assuming the speculative nature of the market, 90% of traders might lose money. In order to compensate the losses rbi will purchased more dollar from the market by selling inr in cheap rates. Thus, leads to devaluation of our inr.
Rbi also noticed that there are many companies in india who advertised through electronic and internet portals offering trading or investing in foreign exchange with guaranteed high returns. There are also many agents in india who worked for these companies and collect payments from them so as to transfer their funds outside india through illegal route and also offer their clients lucrative returns.
Does nri allowed to trade in forex?
Yes, rbi allowed nri’s to trade in forex market as there is no restriction for them. Also exporters in india can do forex trading but for hedging purpose as their profits mainly depend on currency movement.
what are the legal route for indian to trade in forex?
You can trade in forex currency which is denominated in inr means which is paired with inr. Currently, there are four currency pair traded in indian currency market i mean like usd-inr and jpy-inr etc.
rbi guidelines for forex trading in india:
if you live in india and want to do forex trading, then you should follow the reserve bank of india guideline for doing forex trading. you can also see the below snapshot that is taken from rbi website.
forex trading in india – rules and guideline:
now you have understood that forex derivatives is allowed by Indian law. Let us see the rules and regulation of derivative. The framework of doing trading in forex derivative is set by sebi and rbi. The legal guidelines is proved by Foreign Exchange Management Act. Below are the rules and legal route of trading forex derivative in india.
- One can trade in currency derivatives if he is doing by recognized exchanges that are permitted by RBI and SEBI.
- You can trade in 3 stock exchange markets – NSE, BSE and MCX-SX.
- Currently you can trade in derivative by using pairs like pairs of rupees with Dollars, rupees with GBP, rupees with Euro and rupees with Japanese Yen.
- Derivatives are traded on margin so it mean that you have to deposit intial margin money with exchange.
- There is 3 months cycle for options and 1 to 12 months cycles for futures.
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