Did you know that conducting forex transactions on unauthorised platforms could land you in legal trouble? The Reserve Bank of India (RBI) has recently issued an 'alert list' comprising names of entities which are neither authorised to deal in foreign exchange under the Foreign Exchange Management Act (FEMA), 1999 nor authorised to undertake forex transactions on electronic trading platforms
There have been several cases of forex scams in recent months where tricksters lure the public with the promise of hefty returns on investments within a short period. The regulator has time and again cautioned users not to do forex transactions on unauthorised electronic trading platforms (ETPs) or remit/deposit money for unauthorised forex transactions
Using unauthorised platforms for forex transactions could lead to loss of money and penal actions against you. "As per FEMA, resident persons are not permitted to undertake forex transactions on unauthorised ETPs," RBI said.
What happens if you do forex transactions with unauthorised persons or online platforms?
If you conduct forex transactions with unauthorised persons or on electronic trading platforms, you could face legal actions under FEMA, 1999. "Resident persons undertaking forex transactions with unauthorised persons and for purposes other than those permitted under FEMA shall render themselves liable for penal action under the Act," according to the RBI website.
"Forex and currency trading in India is legal but failure to adhere to authorised brokers or permitted currency pairs is a penal offence under FEMA," Bharat Chugh, former Judge & Advocate Supreme Court of India said.
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Explaining the consequences of forex trading and transactions with unauthorised dealers or platforms, Maneet Pal Singh, Partner, I.P. Pasricha & Co, said, "If any person has traded in an illegal manner, the individual will be fined up to Rs 10,000 for the day on which he or she has traded. For more number of days, apart from an initial Rs 10,000 followed by the same amount for each day of violation, may be levied. As per the Act (under Section 13 (1C), a forex trader who has indulged in illegal activity may also be jailed for up to five years."
So, you need to be careful while doing forex transactions online or offline. Here is a guide for you.
How can you do forex transactions?
Resident persons of India (defined by Section 2(v) of FEMA, 1999) are allowed to undertake forex transactions only with authorised persons for purposes permitted under FEMA, 1999. You can also conduct forex transactions which are permitted, online on electronic trading platforms authorised for the purpose by the regulator. You can also undertake forex transactions on the stock exchanges — National Stock Exchange of India Ltd. (NSE), BSE Ltd. (BSE) and Metropolitan Stock Exchange of India Ltd. (MSE)) as per the terms and conditions specified by RBI from time to time, as per the RBI website.
Who are authorised persons or trading platforms for forex transactions?
An authorised person or electronic trading platform is an entity authorised by the Reserve Bank of India to deal in forex, as per the regulator. "It can be an authorised dealer, money changer, off-shore banking unit or any other person for the time being authorised under Sub-Section (1) of Section 10 of FEMA," RBI said.
List of unautorised entities offering forex transactions
To protect investors from scamsters, the central bank on September 7,2022 released an ‘alert list’ containing the names of 34 unautorised entities and advised Indian investors to refrain from using their platforms. Here is the full list of the 34-forex trading online platforms banned by the regulator.
Alpari
AnyFX
Ava Trade
Binomo
eToro
Exness
Expert Option
FBS
FinFxPro
Forex.com
Forex4money
Foxorex
FTMO
FVP Trade
FXPrimus
FXStreet
FXCM
FxNice
FXTM
HotForex
ibell Markets
IC Markets
iFOREX
IG Markets
IQ Option
NTS Forex Trading
OctaFX
Olymp Trade
TD Ameritrade
TP Global FX
Trade Sight FX
Urban Forex
XM
XTB
However, this above-mentioned list is not exhaustive. RBI earlier said that the alert list is based on what was known to the regulator at the time of publication. It further added that any entity not appearing on the "alert list" should not be assumed to be authorised by the RBI.
How to check if your forex dealer or online platform is authorised by RBI or not
You can check the authorisation status of any person or electronic trading platform from the list available on the RBI website.
You can check authorised dealers list on the RBI website: https://rbi.org.in/scripts/category.aspx
For full-fledged money changers list: You can check it here.
List of authorised franchises of authorised dealers or full-fledged money changers can be checked here.
The regulator has also issued a list of full-fledged money changers whose license has been cancelled by the Reserve Bank of India. You can check the list here.
Authorised electronic trading platforms
RBI has mentioned that no entity is allowed to operate an electronic trading platform (ETP) for transactions in instruments such as securities, money market instruments, foreign exchange instruments, derivatives, or other instruments specified by the RBI under Section 45W of Chapter III-D of the RBI Act, 1934, without obtaining prior authorisation of the Reserve Bank.
You can find the full list of authorised electronic trading platforms for forex transactions here.
