Legal accessibility of Forex Trading is one of the most argumentative topics in India. RBI has maintained certain rules and regulations regarding forex trading. Investors must abide by the rules as the main objective behind these rules is to protect our people and country from loss. Before step into the main subject, according to RBI whether forex trading in India is legal or not, a basic background history regarding forex trading is essential. Therefore, let’s start with what the forex trading is and where did it come from.
What is Forex Trading?
The term Forex comes from the Foreign Exchange Market, often refers to FX. It is a decentralized global market and belongs to over the counter section (OTC). I hope you have come across the term OTC. Over the Counter or off-exchange is a different kind of market where trading occurs directly between two parties without the Supervision of an Exchange. Forex is the most liquid, largest and dynamic market in the world with over 5 trillion dollar worth of average daily trading volume. In this market, all the foreign currencies are being traded.
Background History of Forex Trading:
Earlier, there were no such restrictions on the Forex, brokers, and investors could easily trade in Forex. After a few years, when foreign exchange (Forex) reserves of the country became low, FERA (Foreign Exchange Regulation Act) was introduced. FERA prohibits all the transaction which were not permitted by RBI. Later FERA was replaced by Foreign Exchange Management Act. As FERA did not succeed in restricting activities, there was a downfall of the rupee in the year 2013. After that, RBI becomes active and put certain rules and regulation on Forex trading.
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.
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.