You might have seen a lot of advertisements on social media promoting forex trading, mainly platforms like Binomo, OctaFX, and others, but did you know that these platforms usually try to mislead you? Yes! Forex trading isn’t magic, it is a real type of trading where you trade in currency against other international currencies. And yes, forex trading is actually legal in India. But the thing is, you must first learn about it a lot to actually make some profit out of it. For now, though, let’s go over the legality of forex trading in India, shall we?
Actual Legal Framework Governing Forex Trading in India
In India, Forex trading is not totally unlawful but don’t get it wrong though, this type of trading with currency pairs is highly regulated in India and for good reasons actually. The Indian government and its regulatory authorities impose strong rules to protect people from the considerable risks associated with forex trading. Like what? Well, first of all you should know that the regulation of forex trading is overseen by three main bodies: the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Foreign Exchange Management Act (FEMA) 1999. The RBI, which is the primary bank of India, is the one in charge of the forex reserves of the country and also sets the rules for the forex transactions in India. SEBI ensures that the brokers who provide forex trading services comply with all the regulatory requirements to protect their customers. And on top of that, the Foreign Exchange Management Act (FEMA) governs foreign exchange trading and besides specifying the permissible and prohibited activities in forex trading it clearly lays down the rules for all foreign exchange transactions.
All in all, these governing authorities work together to ensure that forex trading is both safe and legal for the citizens of India.
What is Legal and What is Not in Forex Trading in India?
Just so you know, forex trading is allowed in India under certain regulations. Like what exactly? The first thing you need to know is that only trading with exclusive currency pairs or those exclusively with INR (the Indian Rupee) will be recognized as legal trading. Right now, only USD/INR, EUR/INR, GBP/INR, and JPY/INR currency pairs are legal in India. The other legal requirement by the second traders mainly research the background and registration of the exchange before trading. In most cases, these are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Not just that, international platforms or unregulated platforms can expose you to legal action, including fines, so it is important to know that you are trading on an authorized platform only. Thirdly and finally, certain styles of trading like binary trading cannot be legally accepted. The method of binary trading is allowed to operate according to the regulation. To avoid the risky part of that trading method you can do substantial market analysis instead of real buying and selling trading, which is legal in India.
