Is Forex Trading Legal in India?

By siliconindia  |  Tuesday, 14 September 2021, 10:43:13 AM IST

Is Forex Trading Legal in India?

Yes, forex trading is legal in India. Nonetheless, there are stringent governing constraints in place. Indian residents are restricted by the Indian Government to only trade Indian Rupee bench-marked currency pairs.

Although only USD-INR, GBP-INR, EUR-INR and JPY-INR were allowed before December 2015, the number of currency pairs accessible to Indian residents has grown considerably.

Regulation of forex brokers in India

Forex brokers in India should be regulated and authorized by the SEBI (Securities and Exchange Board of India) of India. This is to ensure that all companies follow the FEMA (Foreign Exchange Management Act) of 1999.

Foreign exchange transactions have been regulated by the RBI (Reserve Bank of India) since 1955. One of the key obligations of the RBI is to safeguard against unlawful behaviours tied to Forex trading, for example counterfeiting.

It is also the responsibility of the RBI to provide price steadiness in Indian rupee alongside other currencies, for instance the EUR and the USD.

What currency pairs can be legally traded in India?

Currency pairs which are currently trending in India comprises USD/INR, EUR/INR, GBP/INR, AUD/INR, CAD/INR, NZD/INR, JPY/INR and CHF/INR, to name but a few. Presently, traders who wants to trade on the foreign exchange market, can select between over 20 different currency pairs.

Currency markets available in India

Spot and forward are the two major kinds of foreign exchange markets. The current price, at which a specific currency can be purchased or traded for instant delivery on an open market, is called Spot. Forward relates to arrangements between buyers and sellers. The latter indicates a currency’s future price. In both cases, traders buy or sell currencies based on their expectations about how much they will need them later.

How to trade Forex legally in India?

Foremost, traders should pay attention that CFD platforms are forbidden in India. As a trader, make sure you act withing the law. Always do your research as there has been numerous brokers, both regulated and unregulated, attempting to set up pseudonym outlets and branches in India. Although such organizations may escape the arm of the law from time to time, it is usually not long before information leaks out and they get reported to the local governmental departments. During 2016, xDirect made news headlines when their Indian office was raided.

Always ensure that the forex broker you collaborate with is registered with the SEBI (Securities Exchange Board of India). Without SEBI authorization, atrading platform’s functions,will be considered illegal.

What are the legal consequences of unlawful forex trading in India?

Although there is categorically no ban for NRIs (Non-Resident in India) to trade forex in India, it must be emphasized that, according to the FEMA (Foreign Exchange Management Act) of 1999, any trader that is found guilty of involvement in illegal forex trading in India, can not only receive a hefty fine, but can be sentenced to jail.

How to start forex trading in India

To commence forex trading in India, prospective traders, who have done their research, need to first open an account with a regulated Forex broker or dealer. Once this step has been taken, trades can be placed on various currency pairs.

Traders can unquestionably turn a profit, but do not expect to get wealthy immediately. Your success as a forex trader depends on knowing the markets and the risks you are willing to take.

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The best time to trade forex in India

The best time to trade forex in India would depend on the currency pair you choose to trade. Ensure that you know when the markets are active, e.g., the recommended time to trade European and American markets, known as currency pair EUR/USD, would be between 05:30 and 20:30.

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