Indian Forex Brokers

Forex Trading Information and Regulation in India

The subject of whether traders are allowed to carry out forex trading in India is indeed a very controversial one. The confusion arises principally because of the policies that the Reserve Bank of India (RBI), which is the Indian central bank, has formulated with regards to the exchange of the Indian Rupee with foreign currencies, and also with regards to investment in what it terms “speculative” investments.

For instance, the RBI has a regulation which pegs the maximum amount of money that can be exchanged for the Indian Rupee by an individual in a year to $200,000.

There is also a clause in this law which states that such currency exchange should not include “speculative purposes”. The RBI came out with a statement sometime in 2011 to the effect that “a person resident in India may enter into currency futures or currency options on a stock exchange recognized under section 4 of the Securities Contract (Regulation) Act, 1956, to hedge an exposure to risk or otherwise, subject to such terms and conditions as may be set forth in the directions issued by the RBI from time to time”.

Furthermore, the RBI went further to state “that remittance in any form towards overseas foreign exchange trading through electronic/internet trading portals is not permitted under the Foreign Exchange Management Act (FEMA), 1999. The Reserve Bank has also clarified that the existing regulations under FEMA, 1999 do not permit residents to trade in foreign exchange in domestic/overseas markets. Residents are, however, permitted to trade in currency futures and options contracts, traded on the stock exchanges recognized by the Securities and Exchange Board of India (SEBI) in India, subject to the conditions specified by the Reserve Bank from time to time.” This has led many to erroneously believe that operating a forex trading account in India is totally outlawed.

A closer look at the RBI guidelines listed above clearly indicates that individuals are allowed to operate a forex trading account in India, but under the provisions of the appropriate laws which state that the only kind of forex accounts in India are those tailored towards forex futures and options contracts and not spot forex trading. Even at that, only brokers recognized by the Securities and Exchange Board in India are allowed to accept forex accounts from Indian residents.

One of the ways to operate a forex trading account in India for futures and options is to look for an international broker that has an office in India. Alpari seems to have opened an office in Mumbai, and many European brokers have also followed suit. It will be worthwhile to check this out.

Another way is to open a multi-currency currency futures and options trading account with a large international bank. This will enable the trader to operate a futures trading account in India without having to continuously exchange India Rupees for US Dollars and vice versa. You will be able to fund your account in Rupees and withdraw in Rupees, even if trading is conducted in US Dollars. The reason for using an international bank that also offers brokerage services is to solve the conversion issues.

In conclusion, we can categorically state that you can operate a forex trading account in India, but make sure to do so within the confines of the laws.