Forex Trading In India Is Legal Or Not?

Trade-in Forex market is done on the margin trading principles that means you can trade with a relatively smaller deposit for a bigger amount. In order to save foreign reserve and save country people from loss, RBI restricted forex trading. Previously, LRS (Liberalised Remittance Scheme) was 2 lac but now RBI restricts it with 70-75k. Without abide by these restrictions, trade-in Forex considers as illegal. Though, there are legal ways by which you can be attached with FX.

Legal route of doing Forex trade is to choose a SEBI registered dealer. You can do trade there with the help of a registered dealer. Authorized dealer list is available on SEBI website. Investors should beware of fake dealers in the FX. It is advisable to abide by RBI rules and regulation of Forex trade. If you want to know detail rules by RBI, can check the PDF file I have attached here.

Is Forex Trading In India Legal?

It is a settled fact that no Indian citizen, as guided by SEBI and regulated by RBI in order to minimize risk incumbent in it, can undertake forex trading inside the Indian Territory through any electronic or online forex trading platform under any circumstances. By virtue of RBIs circular issued in 2013, forex trading through electronic or internet trading portals has been prohibited. However, forex trading is held legal when one does it through specified foreign exchange trading platforms and the base currency is INR (Indian Rupees). Simply put, the Indian Government has limited trading for Indian residents to only trade currency pairs which are bench-marked against INR (Indian Rupee).

As an Indian resident, as long as you are trading through any specified Indian Brokerage allowing access to Exchanges based in India such as the NSE, BSE, MCX-SX, and also provides access to currency derivatives, the transactions made for the trade is held entirely legal. Earlier, the only tradable instruments were EURINR, GBPINR, JPYINR, and USDINR. However, the Reserve Bank of India further, from 10th December 2015 onwards, allowed exchanges to offer cross-currency futures contracts and exchange-traded currency options in three more currency pairs namely, EUR-USD, GBP-USD, and USD-JPY

Strategies for Forex Trading in India

• => Though Forex trading is legal in India, still investors must take into consideration it as a risky trade.


• => It is advisable to consult a lawyer first to know the procedure well.


• => SEBI imposes restrictions on the maximum availability of leverage, types of trading, and the rules governing exotic currency pairs, etc.


• => As a Forex trader in India, investors have to invest their money with Government approved SEBI Forex brokers.


• => In India, a majority of Forex brokers only allow its traders to trade on INR related currency pairs.


• => Without the Indian authorities’ approval, Trading with an international broker and depositing money from an Indian account to an overseas bank account is strictly against the Indian law.


• => In terms of analysis, forex trading analysis is more or less the same as the equity analysis. Technical and fundamental both of the analysis routes are followed here.

How To Start Forex Trading In India?

As I have mentioned earlier that when forex trading was introduced in India, there were only foreign brokers like FXCM, ALPARI, GCI, AVA, OANDA, etc. After restriction from the Reserve Bank of India, investors can trade in Forex but only through Indian SEBI registered broker. Now, at present all you need to trade in forex is to have a Demat account. Forex is legally allowed within Indian Exchanges, BSE, NSE, MCX-SX (Multi commodity exchange). Indian resident including banks, financial institutions, can do Forex trade in various currency pairs like EURUSD, GBPUSD, JPYUSD, USDINR, EURINR, GBPINR, etc.

Points to Remember for Successful Forex Trading

• => Forex trading is similar to equity trading, the only difference is in equity trading, share value matters while in the forex trading exchange rate matters.


• => Investors must have sufficient knowledge and enough experience regarding market and price action prior to forex trade.


• => Forex market remains open all over 24 hours 5 days a week but in India market close at 5 pm. Hence, it is advisable to choose intraday rather than position.


• => Be aware of the scams in the forex market.


• => NRIs are not bound to follow any rules of RBI regarding the forex trade, they can choose foreign brokers also and trade. The RBI rules of SEBI registered broker is only for Indian resident.

Conclusion

However, Forex is the largest market in the world and there is no doubt about it but you should be cautious about choosing your step for trading in Forex. I hope you will be benefited by the article Forex Trading In India Is Legal Or Not.