Forex trading in India - Legal?. Here is RBI circular

#1
Hi!

Here is the circular from RBI which does not mention anything about Forex margin funding. This I digged out from the forum:

"Hi friends,

I saw so many debating about legality of forex in India. Just for you informations i personaly visited HDFC bank amd discussed the issue wiuth the manager at Vasai (E) branch. She said after confirmations from her seniors that any one can trade in forex .
She gace me a circular copy of RBI which states that any one can invest up to 25000 USD per year . The copy of the circular can be found on RBi site at

http://rbidocs.rbi.org.in/rdocs/Noti...PDFs/51175.pdf

Please do your own home work about this document.


Hope this will be helpful to those who are intrested in trading forex.


Happy Trading



RESERVE BANK OF INDIA
FOREIGN EXCHANGE DEPARTMENT
CENTRAL OFFICE
MUMBAI - 400 001
RBI/ 2004/39
A.P. (DIR Series) Circular No. 64 February 4, 2004
To
All Authorised Dealers in Foreign Exchange
Madam/Sirs,
Liberalised Remittance Scheme of USD 25,000 for Resident Individuals
As you are aware, we have been closely monitoring the macro-economic
developments of the country and initiating suitable policy changes in tune with the
changing scenario. As a step towards further simplification and liberalization of the
foreign exchange facilities available to residents, it has been decided that resident
individuals may freely remit upto USD 25,000 per calendar year for any purpose
for which a Scheme has been formulated as detailed below:
2. Eligibility
All resident individuals are eligible to avail of the facility under the scheme. The
facility will not be available to corporates, partnership firms, HUF, Trusts, etc.
3. Purpose
3.1 This facility is available for making remittance up to USD 25,000 per calendar
year for any current or capital account transactions or a combination of both.
3.2 Under this facility, resident individuals will be free to acquire and hold immovable
property or shares or any other asset outside India without prior approval of the Reserve
Bank. Individuals will also be able to open, maintain and hold foreign currency accounts
with a bank outside India for making remittances under the scheme without prior
2
2
approval of Reserve Bank. The foreign currency account may be used for putting
through all transactions connected with or arising from remittances eligible under this
scheme.
3.3 It is further clarified that the facility under the scheme is in addition to those
already available for private travel, business travel, gift remittances, donations, studies,
medical treatment etc as described in Schedule III of Foreign Exchange Management
(Current Account Transactions) Rules, 2000. (Annexure B).
3.4 The remittance facility under the scheme is not available for the following:
i) Remittance for any purpose specifically prohibited under Schedule-I (like
purchase of lottery/sweep stakes, tickets proscribed magazines etc) or any
item restricted under Schedule II of Foreign Exchange Management (Current
Account Transactions) Rules, 2000. (Annexure B).
ii) Remittances made directly or indirectly to Bhutan, Nepal, Mauritius or
Pakistan.
iii) Remittances made directly or indirectly to countries identified by the Financial
Action Task Force (FATF) as non co-operative countries and territories viz
Cook Islands, Egypt, Guatemala, Indonesia, Myanmar, Nauru, Nigeria,
Philippines and Ukraine.
iv) Remittances directly or indirectly to those individuals and entities identified as
posing significant risk of committing acts of terrorism as advised separately by
the Reserve Bank to the banks.
4. Remittance Procedure
Requirements to be complied with by the remitter
4.1 To avail of this facility, the individual will have to designate a branch of an AD
through which all the remittances under the scheme will be made.
4.2 The resident individual seeking to make the remittance should furnish an
application letter cum declaration in the format as indicated in AnnexureA regarding
the purpose of the remittance and declaration that the funds belong to the remitter and
will not be used for the purposes as detailed above.
3
3
Requirements to be complied with by the Authorised Dealers
4.3 While allowing the facility to resident individuals, Authorised Dealers are required
to ensure that the "Know Your Customer" Guidelines have been implemented in
respect of these accounts. They should also comply with the Anti-Money Laundering
Rules in force while allowing the facility.
4.4 The applicants should have maintained the bank account with the bank for a
minimum period of one year prior to the remittance. If the applicant seeking to make the
remittance is a new customer of the bank, Authorised Dealers should carry out due
diligence on the opening, operation and maintenance of the account. Further the AD
should obtain bank statement for the previous year from the applicant to satisfy
themselves regarding the source of funds. If such a bank statement is not available,
copies of the latest Income Tax Assessment Order or Return filed by the applicant may
be obtained.
4.5 The AD should ensure that the payment is received out of funds belonging to the
person seeking to make the remittance, by a cheque drawn on the applicant's bank
account or by debit to his account or by Demand Draft / Pay Order.
4.6 Authorised dealer should certify that the remittance is not being made directly or
indirectly by /or to ineligible entities and that the remittances are made in accordance
with the instructions contained herein.
5. Reporting of the transactions
The remittances made under this Scheme will be reported in the R-Return in the
normal course. The ADs may also prepare and keep on record dummy Form A2, in
respect of remittances exceeding USD 5000. Authorised Dealers may arrange to
furnish on a quarterly basis, information on the number of applicants and total amount
remitted to the Chief General Manager, External Payment Division, Foreign Exchange
Department, Reserve Bank of India, Central Office, Mumbai-400001.
6. Necessary amendments to the relevant Foreign Exchange Management
Regulations, 2000 as also the relevant Notifications, issued under FEMA, 1999 are
being issued separately.
4
4
7. Authorised Dealers may bring the contents of this circular to the notice of their
constituents concerned.
8. 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).
Yours faithfully,
Grace Koshie
Chief General Manager
 
#2
That is definitely good news for all whi are very much interested in Forex but hasnt traded till due because of some doubts in their mind. I think People should investigate on their own rather than going for rumors. Like i started my trading career last 2 years and now i am quite established here.

Regards
 

asok

New Member
#4
yessssssssss
pls read FAQ 34 of RBI circular and it says
http://www.rbi.org.in/scripts/FAQView.aspx?Id=53

34. Provide an illustrative list of capital account transactions permitted under the scheme?

The remittance under the Scheme is available to the resident individuals for any permitted current or capital account transactions or a combination of both. Under the Scheme, resident individuals can acquire and hold immovable property or shares or debt instruments or any other assets outside India, without prior approval of the Reserve Bank. Individuals can also open, maintain and hold foreign currency accounts with banks outside India. However, it is clarified that remittance from India for margins or margin calls to overseas exchanges / overseas counterparty are not allowed under the Scheme.
------------------------------------------------------
if FOREX spot TRADING is legal in india , then there will be more brokers than traders like us.
 
#5
Trading currencies ie INR vs USD through the exchanges is not illegal, if trade off exchange is illegal in india.Trading foreign currency against another foreign currency (ex:euro/usd) with a brokerage firm abroad is not illegal. But under LRS a Resident indian cannot send fund for margin trading. You can send fund through bank wire up to $200000 per year for investing purpose is permitted under capital account transanctions
 
#6
Hi!

Here is the circular from RBI which does not mention anything about Forex margin funding. This I digged out from the forum:

"Hi friends,

I saw so many debating about legality of forex in India. Just for you informations i personaly visited HDFC bank amd discussed the issue wiuth the manager at Vasai (E) branch. She said after confirmations from her seniors that any one can trade in forex .
She gace me a circular copy of RBI which states that any one can invest up to 25000 USD per year . The copy of the circular can be found on RBi site at

http://rbidocs.rbi.org.in/rdocs/Noti...PDFs/51175.pdf

Please do your own home work about this document.


Hope this will be helpful to those who are intrested in trading forex.


Happy Trading



RESERVE BANK OF INDIA
FOREIGN EXCHANGE DEPARTMENT
CENTRAL OFFICE
MUMBAI - 400 001
RBI/ 2004/39
A.P. (DIR Series) Circular No. 64 February 4, 2004
To
All Authorised Dealers in Foreign Exchange
Madam/Sirs,
Liberalised Remittance Scheme of USD 25,000 for Resident Individuals
As you are aware, we have been closely monitoring the macro-economic
developments of the country and initiating suitable policy changes in tune with the
changing scenario. As a step towards further simplification and liberalization of the
foreign exchange facilities available to residents, it has been decided that resident
individuals may freely remit upto USD 25,000 per calendar year for any purpose
for which a Scheme has been formulated as detailed below:
2. Eligibility
All resident individuals are eligible to avail of the facility under the scheme. The
facility will not be available to corporates, partnership firms, HUF, Trusts, etc.
3. Purpose
3.1 This facility is available for making remittance up to USD 25,000 per calendar
year for any current or capital account transactions or a combination of both.
3.2 Under this facility, resident individuals will be free to acquire and hold immovable
property or shares or any other asset outside India without prior approval of the Reserve
Bank. Individuals will also be able to open, maintain and hold foreign currency accounts
with a bank outside India for making remittances under the scheme without prior
2
2
approval of Reserve Bank. The foreign currency account may be used for putting
through all transactions connected with or arising from remittances eligible under this
scheme.
3.3 It is further clarified that the facility under the scheme is in addition to those
already available for private travel, business travel, gift remittances, donations, studies,
medical treatment etc as described in Schedule III of Foreign Exchange Management
(Current Account Transactions) Rules, 2000. (Annexure B).
3.4 The remittance facility under the scheme is not available for the following:
i) Remittance for any purpose specifically prohibited under Schedule-I (like
purchase of lottery/sweep stakes, tickets proscribed magazines etc) or any
item restricted under Schedule II of Foreign Exchange Management (Current
Account Transactions) Rules, 2000. (Annexure B).
ii) Remittances made directly or indirectly to Bhutan, Nepal, Mauritius or
Pakistan.
iii) Remittances made directly or indirectly to countries identified by the Financial
Action Task Force (FATF) as non co-operative countries and territories viz
Cook Islands, Egypt, Guatemala, Indonesia, Myanmar, Nauru, Nigeria,
Philippines and Ukraine.
iv) Remittances directly or indirectly to those individuals and entities identified as
posing significant risk of committing acts of terrorism as advised separately by
the Reserve Bank to the banks.
4. Remittance Procedure
Requirements to be complied with by the remitter
4.1 To avail of this facility, the individual will have to designate a branch of an AD
through which all the remittances under the scheme will be made.
4.2 The resident individual seeking to make the remittance should furnish an
application letter cum declaration in the format as indicated in AnnexureA regarding
the purpose of the remittance and declaration that the funds belong to the remitter and
will not be used for the purposes as detailed above.
3
3
Requirements to be complied with by the Authorised Dealers
4.3 While allowing the facility to resident individuals, Authorised Dealers are required
to ensure that the "Know Your Customer" Guidelines have been implemented in
respect of these accounts. They should also comply with the Anti-Money Laundering
Rules in force while allowing the facility.
4.4 The applicants should have maintained the bank account with the bank for a
minimum period of one year prior to the remittance. If the applicant seeking to make the
remittance is a new customer of the bank, Authorised Dealers should carry out due
diligence on the opening, operation and maintenance of the account. Further the AD
should obtain bank statement for the previous year from the applicant to satisfy
themselves regarding the source of funds. If such a bank statement is not available,
copies of the latest Income Tax Assessment Order or Return filed by the applicant may
be obtained.
4.5 The AD should ensure that the payment is received out of funds belonging to the
person seeking to make the remittance, by a cheque drawn on the applicant's bank
account or by debit to his account or by Demand Draft / Pay Order.
4.6 Authorised dealer should certify that the remittance is not being made directly or
indirectly by /or to ineligible entities and that the remittances are made in accordance
with the instructions contained herein.
5. Reporting of the transactions
The remittances made under this Scheme will be reported in the R-Return in the
normal course. The ADs may also prepare and keep on record dummy Form A2, in
respect of remittances exceeding USD 5000. Authorised Dealers may arrange to
furnish on a quarterly basis, information on the number of applicants and total amount
remitted to the Chief General Manager, External Payment Division, Foreign Exchange
Department, Reserve Bank of India, Central Office, Mumbai-400001.
6. Necessary amendments to the relevant Foreign Exchange Management
Regulations, 2000 as also the relevant Notifications, issued under FEMA, 1999 are
being issued separately.
4
4
7. Authorised Dealers may bring the contents of this circular to the notice of their
constituents concerned.
8. 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).
Yours faithfully,
Grace Koshie
Chief General Manager
some non co-operative countries like ukraine is de listed by FATF
 
#7
Hi,

The FAQ is self evident. However, we need to know current position of RBI relating to Forex Trading in view of forex trading on Indian stock exchanges with INR and other currencies.

Recently I understand that Alpari of UK a forex broker is offering their services, but we have to verify whether remitting funds to them as deposit can be construed as deposit or margin money.

Hence, latest position of RBI on the issue should be ascertained. Well versed friends can help us all.

Thanks.

Sharad Kapadia
 
P

preetksgill

Guest
#8
Any legality issue applies to brokers accepting money from Indians for margin trading, not to Retail traders

If the restrictions were to be applied to retail traders then credit cards would not exist which are rampantly used to fund forex accounts.

In short, you cannot open a forex brokerage company in India.

But, the simple workaround is to function as Introducing Broker which comes under Internet Marketing and legal...LOL

RELIANCE MONEY has used this loophole and functions as IB for FXCM

So,

if a company this big can do it, why should you bother whats legal and whats not, carry on trading .....
 
Last edited by a moderator:

desifxtrader

Well-Known Member
#9
Any legality issue applies to brokers accepting money from Indians for margin trading, not to Retail traders

If the restrictions were to be applied to retail traders then credit cards would not exist which are rampantly used to fund forex accounts.

In short, you cannot open a forex brokerage company in India.

But, the simple workaround is to function as Introducing Broker which comes under Internet Marketing and legal...LOL

RELIANCE MONEY has used this loophole and functions as IB for FXCM

So,

if a company this big can do it, why should you bother whats legal and whats not, carry on trading
.....
:clap: Thank you Mr. Gill. That was a good clarification.

These sort of posts appears every month.

Same point I wanted to outline in my posts:


Code:
http://www.traderji.com/forex/15091-attention-forex-trading-illegal-india-11.html#post419241

http://www.traderji.com/forex/15091-attention-forex-trading-illegal-india-11.html#post419949

I see people here in this forum are more interested about legality issues rather than learning to trade for themselves.

I think creating a separate section or an entirely different forum is required for these guys to keep on debating and keep themselves in illusion & confusion about legality of Forex trading in India.

My 2 paise for people who wants to continue these sorts of debate:

Find a good lawyer, and file a case against all the Forex brokers in India, bring the Govt of India & RBI into court room and get your answers rather than wasting your time in arguments in forums. Just do it else leave it. Don't waste your time.

Else, if you want to trade, open an a/c with any of the recognized & reliable brokers in India & start working.

It's high time you should choose what you want to be - A lawyer or a Trader?

Thanks
 
#10
hello all,

This is a year RBI has brought into many restriction to trade forex.. :mad:.. I understand Forex is risky to trade and so is BSE, NSE and so is any other instrument to trade ..

Why dont RBI think on dong something to regulate the forex trade instead of banning it completely banning.. guys have mercy

regards,
Shine
 

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