A case has come to light of unauthorized entities providing foreign exchange trading facilities to Indian citizens by luring them with huge profits or returns. The Reserve Bank of India’s banking sector regulator has disclosed this.
The Reserve Bank of India said it has received information that unrecognized entities provide foreign exchange (Forex) trading facilities to Indian citizens by luring them with huge returns. The investigation has revealed that to give the facility for unauthorized forex trading; these entities engage local agents who open accounts in different banks to collect margin money, investment, or charges. This account is opened in the name of an individual, proprietor, or trading firm. However, the transactions done in these accounts do not match the purpose for which these accounts have been opened.
According to RBI, these entities allow citizens to remit or deposit funds in rupees through domestic payment systems such as online transfers and unauthorized forex transactions using payment gateways.
RBI said that under Section 3 of the FEMA Act, no one except authorized persons is allowed to deal with or transfer foreign exchange or foreign security without the permission of RBI. No institution is allowed to operate electronic trading platforms without the consent of the RBI. On 7 September 2022 and 10 February 2023, RBI also raised concerns regarding unauthorized forex trading platforms.
RBI has said strict monitoring is needed to prevent using banking channels to provide unauthorized forex trading facilities. RBI has asked AD Cat-I banks (Authorized Dealer Category – I Banks) to exercise more vigilance. If such cases are found, they have been asked to immediately report to the Enforcement Directorate and the Government of India.
