Forex Brokers in India.
Forex OTC trading has been illegal in India since 2000, when the Foreign Exchange Management Act (FEMA) came into effect, but traders have found ways to circumvent the law and trade financial markets anyway.
According to a couple of official statements made by the Reserve Bank of India (RBI), the country's central banking institution, Indians are formally not allowed to transfer money to a forex trading account with a broker abroad. In addition, local banks are obliged to report account holders who use their credit cards for such purposes to the RBI.
Fortunately, there are some loopholes, allowing residents of India to fund their accounts without being caught - like funding it through a third party. One of the most popular options are e-wallets like Skrill and especially Neteller.
Of course, there are legal ways of trading forex in India - on local exchanges like National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and Metropolitan Stock Exchange (MSEI) and the list of registered brokers for currency derivatives can easily be found on Securities and Exchange Board of India’s (SEBI) website. However, SEBI Forex brokers are allowed to offer only INR based currency pair options for USD, EUR, GBP, and JPY.
Although retail forex trading is illegal in India, this does not bother foreign forex brokers from offering its services there and maintaining offices in the country. Some, like FXTM even accept local deposits for Indian residents.
Forex Brokers in India.
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Reserve Bank of India moves to stop foreign forex brokers.
It’s no secret that retail forex trading is quite popular in India although, like in China, it is also illegal.
It’s no secret that retail forex trading is quite popular in India although, like in China, it is also illegal. Online spot trading is permitted only at a handful of brokers and currencies but this doesn’t bother foreign brokers from entering this market and soliciting local clients, after all it’s very profitable…
It seems that Reserve Bank of India had enough of it – it’s both illegal and harms one of its core businesses – therefore it issued a warning to credit card processors. The regulations under Foreign Exchange Management Act (FEMA), 1999, do not permit resident Indians to trade in foreign exchange in domestic or overseas markets. The RBI’s instruction comes in the wake of introduction of overseas foreign exchange trading on a number of Internet and electronic trading portals, luring the residents with offers of guaranteed high returns based on such forex trading. Several people have lost heavily in forex trade through Internet portals in the recent past.
“The advertisements by these Internet or online portals exhort people to trade in forex by way of paying the initial investment amount in Indian rupees,” the RBI said.
Many companies even engage agents who personally contact gullible people to undertake forex trading and investment schemes and entice them with promises of disproportionate or exorbitant returns, the RBI said.
Such companies ask public to make the margin payments for such online forex trading transactions through credit cards or deposits in various accounts maintained with banks in India, the RBI said.
“…the card issuing companies who may also be advised to remain alert against permitting payments for such unauthorised transactions,” the central bank said.
The apex bank said it has also observed that accounts are being opened in the name of individuals or proprietary concerns at different bank branches for collecting the margin and investment money.
The banks have been asked to exercise “due caution and be extra vigilant” in respect of the such transactions, the RBI’s circular said.
Any resident Indian collecting or remitting such payments outside India is liable to be proceeded against with, for contravention of FEMA and violation of regulations relating to Know Your Customer (KYC) norms and Anti Money Laundering (AML) standards, the circular added.
Will it stop any foreign forex brokers from operating in India? Take a guess.
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6 Comments on "Reserve Bank of India moves to stop foreign forex brokers"
“The apex bank said it has also observed that accounts are being opened in the name of individuals or proprietary concerns at different bank branches for collecting the margin and investment money.”
i think they are talking about Nigerian lottery scam not the forex industry itself , they are mixing both of them together. It’s sad , they must be able to differentiate both the things clearly and then take action.
What the hell is this, then first ask RBI why they permit Alpari India Branch in Mumbai how can they work in India.
Alpari India Pvt Ltd is an IB to Alpari UK. So it may be the same concern, in legal terms they are just an Introducer of clients to Alpari UK and not Alpari themselves… In essence, there’s no violation of being a foreign broker in India.

Forex Brokers in India.
Forex brokers active in India are subject to the regulations and oversight of the Securities and Exchanges Board of India (SEBI), which is an independent body tasked with ensuring the smooth functioning of the country`s stock markets and brokers. Commodities trading is also regulated by the Forward Markets Commission, which is the regulatory structure for the management of non-exchange traded financial instruments. The Reserve Bank of India is responsible for managing the Indian rupee but is not involved in the oversight of forex broker.
India has changed rapidly since the liberalization of the 1990s. After the relaxation of regulations and opening up of the country to foreign ownership and investment, the economic performance of India has been robust. Nonetheless, retail forex brokerage business is barely existent in the country at the moment, with active brokers operating from inside India as branches or subsidiaries of large international firms still being counted in single digits.
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Retail forex trading in india

Being from India, I had many doubts about legal aspects of Forex trading. So, I took the opportunity to investigate and find answers to if Forex Trading is legal or illegal in India .
I am not a legal expert, hence my answers in this short commentary is not written for lawyers but for ordinary people looking for Forex trading in India . Thus, this short research is based on a number of short talks with local experts, reading the government regulation on ETF trading and Futures trading to find out whether or not Forex Trading is legal or illegal in India .
First Question: Can you trade Forex in India?
Common and the most straight forward answer for this question is, of course: – “there is a will there’s a way”.
You can trade Forex in India with Indian Exchanges (NSE, BSE, MCX-SX) which offers Forex Instruments. However, Indian Exchanges currently offer USDINR, GBPINR, JPYINR and EURINR pairs for trading purposes.
Forex Trading in India.
If you are an Indian resident and wish to trade forex, you cannot trade all the instruments as mentioned above. Hence, in short global Forex market is like not so global in India. Although, the foreign exchange (forex) market is decentralized global market to allow the trading of currencies (buying, selling exchange of currencies), there are countries seeing this decentralized market as a sovereignty threat. Thus, due to sovereignty issues the Indian government has limited Forex trading in India.
Why do we need the foreign exchange market?
The foreign exchange market helps both international trade and investments through currency conversion. For example, a business in the USA wants to import goods from India, the USA business has to pay for the imported goods in Indian Rupees, yet its primary income is in US dollars. Many retail traders may or may not know that the foreign exchange supports direct speculation. The evaluation relative to the value of currencies, speculation based on the interest rate differential between two currencies.
“Writing laws is easy, but governing is difficult.”
So, the government of India has not forbidden to trade Forex, but limited the trading for Indian residents to only trade currency pairs bench-marked against INR (Indian Rupee). As a an Indian resident, as long as you are trading through an Indian Brokerage, which allows access to Indian Exchanges such as the NSE, BSE, MCX-SX and providing access to currency derivatives is entirely legal. These tradable instruments are EURINR, GBPINR, JPYINR, and USDINR.
But, the Reserve Bank of India on the 10th of December 2015 allowed exchanges to offer cross currency futures contracts and exchange-traded currency options in three more currency pairs. The RBI allowed exchanges to offer cross currency futures contracts. The exchange-traded currency options in the pairs of EUR-USD, GBP-USD, and USD-JPY with immediate effect.
Why is India limiting Forex trading?
To answer the question – “Why is India limiting Forex trading?” we need to look into the main reason behind the RBI statement.
So, let’s study the logic behind the Reserve Bank of India (RBI). When you trade EURUSD with “non Indian” traders/brokers, if and when you lose you would buy USD from RBI. This results in an increase in current account deficit (lack of foreign currency reserve). If everybody in India trades forex with Foreign brokers and traders outside India, with the notorious nature of trading where the majority of traders eventually lose, RBI stands to lose a substantial amount of US dollars. To counteract this outflow of US dollars, the Indian Government then forced to buy more US dollars, by selling INR at cheaper rates, leading to the devaluation of the INR. Hence, the simple logic why Forex trading in India is limited .
Trading USD vs EUR in India.
You remember, above, I mentioned “there is a will there’s a way”, this is exactly true in case of Forex trading in India. Assuming that you want to trade EURUSD, USDJPY or EURJPY or other possible combinations, but your local exchange does not offer such instrument.
In this case, you may trade USDINR and EURINR that the INR gets eliminated and technically end up trading USD vs EUR. There is however a big disadvantage of trading Forex via crosses this way and it is the increase in transaction costs and there is often lack of liquidity.
Meanwhile, you should note that CFD platforms are not legal in India, thus from a broader perspective trading on leverage is not allowed in India. You as a trader should know your limits and act accordingly. So far, the government has not really cracked down on retail traders however there has been major crackdowns on a number of brokers illegally operating in India.
There has been regulated and unregulated brokers trying to establish their branches in India under different names, from education academies to training schools or consulting agencies. These entities often get away with their activities from a few months to a few years until someone gets to report them to the local authorities. Such as the xDirect Indian office raid earlier in 2016.
List of countries Forex trading is restricted.
Belarus Bosnia & Herzegovina British Columbia (Canada) Bulgaria Burma China (Strict regulations and event total ban) Cuba Indonesia Ivory Coast Iran Liberia Macedonia Malaysia Montenegro Myanmar Nigeria North Korea Pakistan Quebec (Canada) Romania South Korea Sri Lanka (Recently relaxed) St. Helena Sudan Syria Ukraine Zimbabwe.
India is not the only country to restrict Forex trading. Indeed , Forex trading is restricted in about twenty countries globally. These countries promote propaganda to push their citizens away of Forex trading (online or offline). Often you’d see some of these countries painting the picture for the west as evil.
For India, trading on other pairs rather than defined by RBI is illegal under FEMA Act. Trading forex in India through an online broker is a non-bailable offense in India. With many online brokers who misguide retail investors claiming forex trading performed legally through them. Moreover, RBI claims the restrictions are there to prevent retail investors/traders from losing big time. However, many India citizens believe that the main reason is to stop the currency outflow. I meanwhile, believe that RBI will ease in their limits in the coming period as India is going through the financial change.
Think we missed something? Let us know in the comments section below.