Is Forex Trading Illegal in India? Legal or Illegal?

Forex trading in India has always been a contentious topic. Traders are always confused is forex trading legal or illegal in India and is forex trading allowed in India or not. Forex trading in India is subjected to various restrictions and limitations. These Forex trading rules and regulations in India are maintained to safeguard its people from losses. These rules decide if forex trading is legal or illegal in India.

So, before finding the answer to “Is forex trading legal in India?” and getting into the legal aspects of forex trading in India, we must have some basic knowledge about forex trading.

What is Forex Trading?

Forex trading refers to the foreign exchange or trading of foreign currencies in the global market. Forex trading aka currency trading is the largest and highly volatile market in the world.

The forex market is decentralized in nature as the exchange is done over the counter section, in short, refer as OTC. OTC is a market where the exchange of foreign currencies takes place directly between the parties without any supervision.

On average, the daily transaction volume of forex trading amounts to $5 million. Although it offers lucrative gain, it is dynamic and fluctuates continuously. But have you ever wondered why forex trading is illegal in India? You will get an answer in this article.

What is Currency Trading?

Before jumping to Forex trading, let’s understand what is currency trading. The currency market is one of the largest markets in the world which keeps on growing.

Currency trading is the buying and selling of currency pairs at a particular exchange rate in the foreign exchange market. It is the highest liquid market. It is the biggest market but very risky for traders.

Forex Trading in India

Just like stocks, you can buy and sell currency based on what you think its value is or by simply strategizing where its value is added. It is legally allowed to trade in forex trading in India like BSE, NSE, MCX-SX.  However, you can hit big or loose. But must have heard people asking why forex trading is illegal in India?

Now, Let’s find out “Is forex trading legal in India?” Forex trading in India is not legal as per the RBI and government guidelines. Since this market is very volatile so our RBI doesn’t allow us to invest in this. If you are a beginner who wants to trade in the forex market then we advise you to read its guidelines.

Since the government prohibited us from forex trading, but there is one way we can invest in forex trading in India that invests via a foreign broker.

There are plenty of online foreign brokers on the internet that helps you to invest in the forex hassle-free. In case you lose money no one is responsible for it. So do at your own risk.

Is Forex Trading Illegal in India?

Do you also think forex trading illegal in India? But the truth is Forex trading is not illegal in India. It is legal to do forex trading through the Security Exchange Board of India (SEBI) registered dealers. You can view the entire list of registered authorized dealers on the SEBI website.

Forex trading is possible in India only with Indian Exchanges like NSE, BSE, and MCX-SX offering forex instruments. With the help of the Indian Exchanges, you can trade currency pairs-GBPINR, USDINR, JPYINR, and EURINR.

However, from the year 2015 onwards, the Reserve Bank of India (RBI) has permitted the exchanges to offer cross-currency futures contracts and exchange-traded currency options in currency pairs EUR-USD, USD-JPY, and GBP-USD.

Fema Act declares forex trading illegal in India, if done using the non – INR currency as the base currency, you must always use Indian currency for trading as the base currency. As per SEBI and RBI directives, no Indian citizen is permitted to trade forex via any electronic or online forex trading forum.

In simple words, an Indian citizen can do forex trading with currency pairs benchmarked against INR currency through listed forex trading portals. This is what makes forex trading legal in India.

So the Answer for “Is forex trading illegal in India?” is “No”. Forex trading is legal in India.

Is Forex Trading Legal in India?

Now that you know about forex trading, the question arises “Is forex trading legal in India?” The answer is “Yes, the forex trading is legal in India but with some limitations. Forex refers to the foreign exchange market, which involves the selling and buying practices of fiat currencies. It is one of the highly liquid and largest markets on a global scale. Many investors had created immense wealth by investing in the Forex; some of them burned their pockets. It is a relatively new investment option that has gained huge attention from Indian investors.

However, due to unreliable brokers and a huge risk, Forex is restricted in India.

Many investors are constantly asking, “Whether forex trading is legal in India or not?” Well, the government of India and RBI have limited this trading option. It’s not completely banned; it’s limited. India is not only a country where Forex is restricted; there are twenty countries globally that don’t allow their citizens to trade in Forex.

However, forex trading can be an appealing approach for experienced investors, but it is completely banned in India. Many Indian investors are investing in Forex via overseas brokers. They are doing it at their own risk.

The forex market is very volatile. If you are thinking to invest in it, we advise you to deeply research it and select a highly trustable overseas broker who can help you in the best possible way.

Forex Trading in India Legal or Illegal?

Usually, beginners always worry that “Is forex trading legal in India or not?” As per the RBI guidelines, forex trading in India is completely illegal. But Indians are investing in this market by taking the help of online international brokers. Now, Forex brokers accepting us clients are a great help for beginners. If you are just like another beginner who wants the right answer of forex trading in India legal or illegal well it’s very hard to say, you can invest in forex hassle-free. There are many forex trading rules and regulations in India that the government has set for the traders.

So, if you ask anybody whether a forex trading in India is legal or illegal, he will by the laws you can’t trade in this market.

Why Forex Trading is Illegal in India?

Many a time, we come across the question “Why forex trading is illegal in India?” let’s find it out. As mentioned forex is a very volatile market. Either you will lose it all or get huge. The foreign exchange market is decentralized, highly liquid, and global people also participate in this. Due to high competition and high volatility that’s why forex trading is illegal in India. And of course, US currency is higher than Indian, in case people lose, they can bear the load of losing money. It is one of the significant reasons that’s why forex trading is illegal in India.

The government cares for its citizens and wants to safeguard them from falling into huge losses, this is the reason why is forex trading illegal in India.

Is Currency Trading Legal in India?

Now the question is “Is currency trading legal in India?”. Yes, currency trading is legal in India if done properly following the forex trading rules in India. Currency trading can leave you financially empty. That’s why some forex trading rules in India are made to safeguard you from losing your money.

Is Forex Trading Banned in India?

This is all the time a famous question among Indians “is forex trading banned in India?”. Let’s find out. As we already know the risks associated with forex trading in India are very high and the government has made forex trading illegal in India if done without following forex trading rules. Forex trading ban in India if done binary however trading is allowed in foreign currencies with some limitations. Forex trading ban in India with some platforms which government has banned. Some of the forex trading platforms are banned in India.

How does the Forex Market Work?

Forex trading is similar to the trading of stocks; just like you purchase and sell a stock. It is synonymously referred to as currency trading in India. It is a marketplace for buying and selling foreign currencies of different countries which makes the forex market legal in India. One currency is traded in exchange for the other currency.

The two forex currencies involved form a currency pair which is represented by the three letters. Indian rupees are represented as INR, United States dollar as USD similar representation of other currencies

Suppose, an investor purchases currency pair USDINR where USD is US dollars and INR in Indian currencies. Let’s assume that time the current market price of the dollar is Rs. 67 and investors expect it to reduce Rs. 66.

The trade will be short selling as when the value reaches Rs.66, he/she would get a profit of Rs. 1. On vice versa, if the value exceeds, there will be a loss. The reverse happens in the case of buy trading. In this case, the investor takes advantage of the rise in the price of the dollar.

Best Brokers in Forex Trading in India

After getting the answer for forex trading in India legal or illegal, let’s know about the best brokers in this field. In forex trading, brokers are facilitating firms that help traders to access the global platforms for buying and selling foreign currencies. Although many countries provide flexibility in currency trading, in India, there are limitations and restrictions.

You need to have a thorough research of the legal aspect to enter currency trading in India. You can invest in the forex market through a specified and authorized broker only. The forex broker must be registered at SEBI. And the majority of them will offer currency pairs with Indian rupees.

Best Forex Trading Tips You Must Know

Now, as you know, forex trading is legal in India, you need to follow some important tips before trading. While choosing out a legal way of entering a forex market with approved and authorized brokers, you must know some basic tips. To begin forex trading on the proper notch, here some quick forex trading tips:

1. Identify your goals and trading strategy

Before starting, you must set your goals and trading strategy. The forex market works for 24 hours. You can choose your time.

2. Well-versed with fundamental lingos

There are basic forex terms that you must learn and get acquitted. You can get a grasp of the forex terminologies and fundamentals with the articles available over the internet.

3. Beware Scams

Even though the Indian government has laid restrictions to protect its people, the broker’s scams still exist. To avoid legal implications, illegal practices, and losses, be careful while collaborating with forex brokers. Compare them and ask for SEBI authorization.

4. Keep updated yourself with economic activities

The forex market is dynamic and fluctuates continuously. To gain money from forex trading you must study the market trends, read economic news, and keep yourself updated with international markets. You must track the price movements of the currency and set your goals.

Points to Remember:

  • In India, trading with currency pairs other than approved by the RBI is an illegal and punishable offense under the FEMA Act.
  • Forex trading in India is legal only through authorized and registered brokers with SEBI.
  • Trading through online brokers is a non-bailable offense in India and has serious legal consequences.

Forex Trading Strategies in India

With limitations and restrictions, investors consider forex trading is risky. The high liquidity and decentralized nature can easily make you lose money than gaining profits. But with thorough research and proper strategy, you can enter the forex market. Following the proper guidelines and some strategies can make forex trading legal in India.

Here some basic strategies of forex trading:

1. Trend Trading

The trader uses the trend of the price of the currency (upward or downward trends) to begin. In trend trading, traders analyze the price movements of the currency. With the help of several online tools available in the market, the traders can perform the analysis.

2. Price Action Strategy

This is the most common strategy that a trader applies in the forex market. This strategy depends on whether the price action in the currency is bullish or bearish. It applies to all market conditions.

3. Range Trading

In range trading, the currencies are traded in a specific price range. The trader needs to look for a favorable market condition for trading, as the price level is driven by the demand and supply of the currencies.

4. Countertrend Trading

In this type of trading strategy, traders capitalize on small gain and trade with an expectation of a reverse trend against the current trend in the future.

5. Position Strategy

For a positioning strategy, you need to have strong market fundamentals and analytical skills. The experienced traders use this strategy with a thorough analysis of the entire day charts.

6. Breakout Trading

The trader uses this strategy to enter the market when the price movements emerge out of the previously defined trading range known as a breakout.

How to do Forex Trading in India? (for investors)

The government has imposed so many restrictions on forex trading in India that investors start questioning whether forex is legal or illegal in India. It is out of the question of someone to ask that forex trading in India is legal or not.

Forex is legal in India, but with restrictions from the SEBI and RBI. The restrictions are so rigid that the investors cannot help wondering whether forex trading in India is legal or not.

There are a few things that the investors should keep in mind when they are forex trading India –

1. Forex Trading Legal or Illegal in India

Before trading in forex trading in India, investors should research if forex trading allowed in India. Is forex illegal in India? The answer is no. But, is forex legal in India? Yes. But with restrictions imposed by the RBI and SEBI make it seem illegal.

The question is forex trading legal in India is for those investors who do not research thoroughly. That is why the investors must research thoroughly so that the question of whether or not the government has made forex trading India legal or not, does not arise. RRBI has made forex trading India legal only if the investors invest in the currencies that are authorized by the RBI and SEBI.

2. Only Regulated Brokers can Manage Forex Trades in India

Only a regulated broker, who does forex trading is legal in India. Only the investor, who with the help of a regulated broker, does forex trading is legal in India. Forex trading is a risky process in India. So the investors need to be on their toes so that they not only invest wisely but invest in such a way that all the precautions are taken by them so that their trading is very much legal.

Forex trading can only be pursued in India if it is carried out by regulated brokers as per the guidelines of the RBI and SEBI. The investors do not need to worry whether or not is forex legal in India if they strictly abide by the guidelines of the RBI and SEBI.

3. Elements that drive Forex Trading in India

Certain elements drive forex trading in India like day trading, scalping, and position trading. These are the strategies that are followed by Indian investors so that the exchange rate can be determined by the buying, selling, and exchange of currencies.

Punishment for Forex Trading in India

As, forex trading is illegal in India but by following some government rules and regulations, you can make forex legal in India. But the traders are still trading in forex illegally without following the rules and regulations of the Indian government that is why forex is illegal in India.

Illegal forex trading in India is a punishable offense that sometimes confuses the beginners and they think is trading legal in India? But one must understand when is trading legal in India and when not.

Till now we have discussed is forex trading legal in India 2020. The punishment for forex trading in India is applicable if done illegally. If the trader follows the FEMA guidelines, he will find forex legal in India otherwise a huge punishment.

Many traders are trading while breaking the FEMA rules this is the reason why is forex trading illegal in India

So, in simple words, if a trader is following all the rules, the forex is legal in India otherwise forex is illegal in India.

Final Words

If you are also confused about forex trading in India legal or illegal, so, Forex trading is not illegal in India. Forex trading is legal in India but currency trading in India is limited to the regulation and restrictions imposed by the RBI and SEBI. One must be cautious and well-informed about these regulations while entering forex trading and this makes forex trading legal in India. For some detailed instructions log on to Financegab.com.

Is Forex Trading illegal in India – FAQs

Q1. Is forex trading legal in India 2020-21 and what rule one must follow?

Ans. Yes, forex trading is legal in India but the trader needs to follow some rules and regulations set by the Indian Government.

Q2. Why forex trading is illegal in India and what are the strategies to use if one wants to trade in forex?

Ans. The answer to why forex is illegal in India is because the forex is a very volatile market and there are chances that you can lose every penny in this trade.  This is a kind of global trading, people from all over the world participate in it and it is highly liquid. The high competition makes it risky.

The strategies that can be used are- Trend trading, Price action strategy, Range trading, countertrend trading, position strategy, and breakout trading.

Q3. Is forex banned in India?

Ans. If you are also confused that is forex banned in India, so let me clear you, the forex is not banned in India. Some of the forex trading platforms are banned.

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About Sanjay Borad

This article has been written by Sanjay Borad, Founder of eFinanceManagement
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3 thoughts on “Is Forex Trading Illegal in India? Legal or Illegal?

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