Why RBI Issues Warning Against Unauthorized Forex Trading Platforms; Read Complete Details

The Reserve Bank of India (RBI) has observed misleading advertisements for unlicensed Electronic Trading Platforms (ETPs) offering forex trading services to Indian residents, including on social media platforms, search engines, Over The Top (OTT) platforms, gaming apps, and other similar platforms. There have also been reports of such ETPs hiring agents to personally contact gullible people and entice them to participate in forex trading/investment schemes with promises of disproportionate/exorbitant returns. Furthermore, there have been reports of fraud committed by such unlicensed ETPs/portals, with many residents losing money as a result of such trading/schemes.

According to the Foreign Exchange Management Act of 1999, resident persons may only conduct forex transactions with authorized persons and for permitted purposes (FEMA). While permitted forex transactions can be carried out electronically, they must be carried out only on ETPs authorized by the RBI or on recognized stock exchanges (National Stock Exchange of India Ltd., BSE Ltd., and Metropolitan Stock Exchange of India Ltd.) in accordance with the terms and conditions specified by the RBI from time to time. It is also stated that remittances for margins to overseas exchanges / overseas counterparties are not permitted under the FEMA-mandated Liberalized Remittance Scheme (LRS).

The RBI website contains a list of authorized persons and authorized ETPs. A list of frequently asked questions (FAQs) about forex transactions has also been posted on the website for the general public’s convenience.

The RBI warns the public not to conduct forex transactions on unlicensed ETPs or remit/deposit funds for such transactions. Resident persons who conduct forex transactions for purposes other than those permitted by the FEMA or on ETPs not authorized by the RBI may face penalties under the FEMA.