RBI warns against forex trading sites (2024)

RBI said people undertaking transactions for purposes other than those permitted under the Foreign Exchange Management Act (FEMA) or on electronic trading platforms (ETPs) not authorized by the RBI can face penal action under the Foreign Exchange Act.

OctaFX, the official trading sponsor of Indian Premier League (IPL) team Delhi Capitals, is one of the many unauthorized digital platforms under RBI’s scanner for offering forex trading.

The warning comes after an inter-departmental group report in November showed that RBI received frequent queries from the public on online trading such as OctaFX, Olymp Trade, I-Forex, FBS, Expert Option, Binomo.com, AVA Trade, IQ Option, Alpari, Forex.com, and TP Global Forex, which offer foreign exchange trading facilities.

The report said that some of these platforms promise high returns, bonuses, and rewards.

“None of these trading platforms are authorized by RBI. Nor are they recognized stock exchanges registered with Sebi (Securities and Exchange Board of India). As such, the services offered by these platforms are unauthorized," the report said.

Mint has reviewed parts of the report.

Spokespersons for OctaFX and Olymp Trade didn’t immediately respond to requests seeking comment.

RBI noticed that these platforms offered a derivative product called contracts for differences (CFD) during the lockdown period. CFD is an arrangement made in financial derivatives trading where the differences in the settlement between the open and closing trade prices are cash-settled.

“These aspects have been highlighted in advisories issued by RBI in the past, and Authorized Dealer Category-I (AD Cat-I) banks have also been cautioned to exercise vigilance with regard to remittances made for such transactions and the accounts opened for such purposes. Notwithstanding, the available anecdotal evidence suggests the significant proliferation of such unauthorized services being offered to residents," the report noted.

In a press release, RBI said it has noticed misleading advertisem*nts of unauthorized ETPs (electronic trading platforms) offering forex trading facilities to Indian residents, including on social media platforms, search engines, over-the-top platforms and gaming apps.

Some of these platforms also claim to be regulated by overseas regulators and recipients of global awards, it said.

RBI also noted that these apps use features similar to lotteries and casino games to lure users. For instance, these portals conduct free demos and online webinars citing ‘success’ stories. “Reportedly, there are also instances of various schemes such as competitions and tournaments with small amount of fees or registration charges being devised to entice customers."

Further, the report mentions that these platforms have developed alternative remittance routes after RBI banned the use of international debit and credit cards and merchant category codes for forex trading overseas.

For instance, platforms such as OctaFX, IQ Option, Olymp Trade, Exness, XM, Cabana Capital, FXTM, FBC, etc., provide options for payment in rupees using domestic payment systems. Some of them even accept payments through international wallets such as Skrill, Paypal, and Neteller, funded by the resident customer using a debit or credit card. In other cases, these platforms accept payments using bitcoins and other cryptocurrencies to avoid any money trail.

“It is also clarified that remittances for margins to overseas exchanges/overseas counterparties are not permitted under the liberalized remittance scheme (LRS) framed under the FEMA," RBI said in a press release.

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Updated: 04 Feb 2022, 12:20 AM IST