Is Forex Trading legal in India? Are there any regulations to be followed from RBI?
There have been a lot of market speculations whether one can really do forex trading in India.
For some, it may rather be true money making mine yet for some may not. The truth of the
matter is one can absolutely do Forex trading with Indian Exchanges like NSE, BSE, MCX-
SX, etc that offer Forex Instruments. It should be noted that not all forex can be traded since
Indian exchanges are only offering USDINR, GBPINR, JPYINR, EURINR.
Debunking the truth!
An Indian resident can trade in forex with not all instruments he desires, its an absolutely
illegal forms of trading. It is not a global market and open market where anyone can trade in
anything. There are specific rules and regulations set by RBI to trade legally. It opens up
avenues for safe trading.
The foreign exchange is a decentralized global market that allows trading of currencies,
however, some countries find it as a threat. Hence, to protect Indian interests, RBI has limited
forex trading in India due to sovereignty issues
.
Why foreign exchanges?
Foreign exchanges are done through currency conversions. International trading is also kind
of speculation, it evaluates the value of currencies and money is speculated based on the
interest rates. Foreign exchange is not completely banned in India but allows for limited
trading. It allows trading currencies that pair the benchmark against Indian rupees. So, if a
person is trading through Indian brokerage that allows exchanges such as NSE, BSE, and
MCX-SX – the trading is entirely legal.
Why is India limiting Forex trading?
There is a very simple logic behind it as to why RBI has limited the foreign exchange trading.
Suppose, the brokers lose, they are liable to buy more USD from RBI. This leads the RBI to
have a deficit. With more and more people trading, it will lead to tremendous loss of US
dollar to RBI. The outflow can result in buying more US dollars at cheaper INR rates that
may cause to further devaluate the INR. Hence, by curbing FOREX trading, RBI is saving
interest for all forex-trading investors in India.
Conclusion
Forex trading through any trading portal is forbidden in India if caught, you will be charged
with FEMA, Violation of law act, 1999 and sent to jail for doing illegal trading.
You can trade in a legal way in FOREX by –
A. Trading in forex currency that is paired with Indian rupees.
B. You can trade only in MCX-SX, NSE segments, the current pairs you can use are
(USD-INR, JPY-INR, EUR-INR, GBP-INR)
C. Indian currency brokers give good brokerage when you trade in USD-INR.