Forex trading has become quite popular in India in the past few years. With the growing popularity, it is obvious that people in India are curious about a lot of things about forex trading. One of those queries is about the legality of forex trading in India.
Forex trading is actually legal in India but under restrictions from the RBI and SEBI. The government has allowed certain currency pairs that can be traded in Forex in India.
In this article, all the important information is given on how to trade forex legally in India so that traders stay out of trouble.
Forex Trading is Legal in India?
The foreign exchange of currencies is completely legal. Because of strict guidelines and adherence of the government to keeping the foreign exchange as transparent as possible, now and then we hear the question,
“Is forex trading legal in India?” and also,
“ Why is forex trading legal in India?”
So the answer for
“is forex trading legal in India?” is “Yes”
and the answer for
“Why is forex trading legal in India is,
“There are certain limitations and restrictions that the people have to follow while doing the forex trading as per Indian government norms”.
The government of India has only allowed a selected number of currency pairs that are allowed to trade in Forex trading in India.
Therefore the confusion arises and a question that aspiring traders often ask is forex trading legal in India. While forex trading in India, traders are not allowed to trade in any currency pairs which does not involve the Indian rupee with an exception to the three cross currency pairs to keep forex trading legal in India.
Read More: What Is Forex Trading and How Does It Work?
Authorized Currency Pair for Trade in India.
- USDJPY
- GBPINR
- JPYINR
- USDINR
- EURINR
- EURUSD
- GBPUSD
Restrictions on Non-Indian Currency Pairs.
Then another question that puzzles the people is “Is forex trading is legal in India according to the Indian Government?”
It is believed that the government of India has implicated so many restrictions on forex trading in India because of its concern to keep its forex reserves safe.
If foreign currency is traded in the forex market instead of Indian currency, then in case of losses while forex trading in India the foreign currency will be bought from the Reserve Bank of India. This will result in the current account shortage because of the outpour of forex reserves that comes from forex trading in India.
Now many people think, when there are lots of risks involved in forex trading, then why is forex trading legal in India?
Although forex trading has been made legal in India, there are a lot of concerns of the government and one of them is the running the risk of severe potential losses while forex trading in India. That is why the government has made forex trading legal in India with quite some restrictions when it comes to currency pairs.
Forex Trading is legal in India now, but there was a time before 1999 when Indians were not even allowed to hold foreign currency because of the FERA Act 1973. Now that forex trading is legal in India for quite some time, it has become extremely popular over recent years.
By now you might have got your answer for both the questions “Is forex trading legal in India” and “Why is forex trading legal in India?”
Let’s move forward and look at other aspects of forex trading in India.
4 Things to Know About Forex Trading In India
1. Is Forex Trading Legal in India or Not?
To the question of whether forex trading is legal in India, the answer is yes, forex trading is legal in India. Forex trading is legal in India as per the regulations of the government of India. It is a good idea to first get all the necessary information before delving into a risky market such as forex.
The government has made forex legal in India but there are a lot of restrictions while forex trading in India. Forex trading is legal in India only if the traders trade in the currency pairs authorized by the government of India. Forex trading in India can only be carried out through regulated brokers which are directed under The Securities and Exchange Board of India as per the FEMA Act of 1999.
2. Regulated Brokers
Forex trading is legal in India only when it is done through certified brokers. You must educate yourself and research thoroughly about how forex trading is legal in India because only after that you will be able to decide on investing through a well-regulated broker.
Forex trading in India can be highly risky so you must take all the steps forward in a legal way to keep forex trading in India. Forex trading in India can prove to be illegal if it is carried out through non-regulated brokers according to the SEBI and RBI.
3. Forex Drivers in Forex trading in India
Forex trading in India is driven by the traders who indulge in the buying, selling, and exchange of currencies, which determines the exchange rate.
4. Forex Trading Strategies in India
There are 3 forex trading strategies in India which are listed below:
- Day Trading – One of the strategies of forex trading in India is day trading. As the name entails, the traders try to buy and sell the currencies on the same day.
- Scalping – Forex trading in India involves another strategy in which the traders try to make several small trades repeatedly.
- Position Trading – Under this forex trading strategy, the trader buys a currency and tries to keep it for as long as he can. If properly researched, the currencies will earn a huge profit when sold.
Read More: Intraday Trading Strategies
Is Forex Trading Allowed In India?
Forex trading is legal in India because it is regulated but the Reserve Bank of India and the Securities Exchange Board of India. To make forex trading legal in India, the brokers and foreign exchanges are directed by the Reserve Bank of India under the FEMA Act of 1999.
The Securities and Exchange Board regulators are the only ones that the traders are allowed to sign up with, to keep the forex trading legal in India.
With this, it is important to note, that if a trader trades with a non-regulated broker while forex trading in India, then that is considered a punishable offense. Trading in currency pairs other than the authorized ones while trading in Forex trading in India, traders can be imprisoned if found guilty.
As a trader, you should thoroughly educate yourself on how to forex trade in Forex trading in India. That way you will learn all the regulations imposed by the Reserve Bank of India and the Securities and Exchange Board of India. As long as you know what makes forex legal in India, you are good to go as a trader.
It is advisable to put Indian currency as the base currency when trading forex in India.
How to Trade Forex Legally in India
Before trading in forex in India, there are a few things that you should keep in mind.
You should educate yourself. Forex trading in India can be a risky business. The Government of India has imposed a lot of restrictions when it comes to forex trading in India.
It is important to know that the authority of regulations on forex trading in India lies with the Reserve Bank of India and the Securities and Exchange Board of India. The government wants to ensure that the traders of India face minimum losses. Thus the restrictions.
The Reserve Bank of India has authorized currency pairs for forex trading in India. It is illegal to trade in any currency pairs apart from them while forex trading in India.
Forex is legal in India if it is carried out through regulated brokers authorized by the RBI and SEBI. If any trader is caught forex trading in India through a non-regulated broker, it is considered a punishable offense and the trader will face imprisonment.
Online exchange of currencies is banned in India. Traders have to use the base currency INR to trade to carry out forex trading in India legally. It should be noted that along with the online exchange of currencies, electronic and overseas forex trade in Forex trading in India is illegal and the traders can be subjected to punishment.
If the traders use Indian currency as base currency when forex trading in India and trade according to the regulations imposed by the Reserve Bank of India and the Securities and Exchange Board of India then you can forex trade in India legally.
List of Forex Trading Not Legal in Countries
- 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
Is Forex Trading Legal in India – FAQs
Q1. How can I trade legally in Forex trading in India and is forex trading legal in India?
Ans. You should educate yourself. Forex trading in India can be a risky business. The Government of India has imposed a lot of restrictions when it comes to forex trading in India. It is important to know that the authority of regulations on forex trading in India lies with the Reserve Bank of India and the Securities and Exchange Board of India. The government wants to ensure that the traders of Forex trading in India face minimum losses. Thus the restrictions.
Yes, Forex trading is legal in India if you follow all the guidelines and obey the restrictions set by the government.
Q2. Is Forex trading in India legal or illegal?
Ans. The government has made forex legal in India but there are a lot of restrictions while forex trading in India. Forex trading is legal in India only if the traders trade in the currency pairs authorized by the government of India. Forex trading in India can only be carried out through regulated brokers which are directed under The Securities and Exchange Board of India as per the FEMA Act of 1999.
Q3. Why there is always a debate about “is forex trading legal in India or not”?
Ans. The debate about “is forex trading legal in India or not” is due to the risks involved in forex trading. Forex trading becomes illegal if you do not follow the government norms but if you properly obey what the government says about forex trading, it is very legal.
In short, the answer for “Is the forex trading legal In India” is Yes if done according to government rules.
