RBI/2011-12/262
A.P. (DIR Series) Circular No. 46
November 17, 2011
To,
All Authorised Dealer Category I Banks
Madam/ Sir,
Overseas forex trading through electronic / internet trading portals
Attention of the Authorised Dealer Category - I (AD Category - I) banks is
invited to
A.P. (DIR Series) Circular No. 53 dated April 07, 2011 wherein AD
Category I banks were advised to exercise due caution and be extra vigilant in
respect of the margin payments being made by the public for online forex trading
transactions through credit cards / deposits in various accounts maintained with
banks in India. Further, AD Category-I banks were also advised to exercise due
caution in respect of the accounts being opened in the name of individuals or
proprietary concerns at different bank branches for collecting the margin money,
investment money, etc. in connection with such transactions.
- It has been observed that overseas foreign exchange trading has been
introduced on a number of internet /electronic trading portals luring the
residents with offers of guaranteed high returns based on such forex trading.
The advertisements by these internet / online portals exhort people to trade in
forex by way of paying the initial investment amount in Indian Rupees. Some
companies have reportedly engaged agents who personally contact people to
undertake forex trading/ investment schemes and entice them with promises of
disproportionate / exorbitant returns. Most of the forex trading through these
portals are done on a margining basis with huge leverage or on an investment
basis, where the returns are based on forex trading. The public is being asked
to make the margin payments for such online forex trading transactions through
credit cards / deposits in various accounts maintained with banks in India. It
is also observed that accounts are being opened in the name of individuals or
proprietary concerns at different bank branches for collecting the margin money,
investment money, etc. It is again reiterated that AD Category - I banks should
exercise due caution and be extra vigilant in respect of the transactions that
require residents to make margin payments for online forex trading transactions
through credit cards / deposits in various accounts maintained with banks in
India. It is clarified that any person resident in India collecting and
effecting / remitting such payments directly /indirectly outside India would
make himself/ herself liable to be proceeded against with for contravention of
the Foreign Exchange Management Act (FEMA), 1999 besides being liable for
violation of regulations relating to Know Your Customer (KYC) norms / Anti Money
Laundering (AML) standards.
- AD Category - I banks may bring the contents of this Circular to the notice
of their constituents and customers concerned. Authorised Dealers may also give
wide publicity to the instructions contained in the A.P. (DIR Series) Circular
No. 53 dated April 07, 2011 and the Press Release issued by the Reserve Bank
dated February 21, 2011 (copy enclosed). The instructions contained in this
circular may also be brought to the attention of the card issuing companies who
may also be advised to remain alert against permitting payments for such
unauthorized transactions.
- The directions contained in this circular have been issued under sections
10(4) and 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
are without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully,
(Meena Hemchandra)
Chief General Manager-in-Charge