Is Forex Trading Legal in India | Trade with Purab @acetradingofficial
Published: 2024-10-02
Status:
Available
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Analyzed
Published: 2024-10-02
Status:
Available
|
Analyzed
Predictions from this Video
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Prediction
Topic
Status
Forex trading is not legal in India, and the video will explain the nuances of legal trading, illegality, and related aspects.
"forex trading is not legal in India. Now this has given the answer. Now, we will understand whether it is legal in India or not. What is legal? How can you trade legally? Why is it illegal? We will learn all these things in this video."
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Forex trading has been illegal in India for the past 25 years (1999-2024).
"forex trading has not been legal in India in the last 25 years, from 1999 till 2024."
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The RBI released a list on November 24, 2023, identifying 75 illegal forex brokers in India, including popular ones like Axis, OctaFX, and MetaTrader 4.
"They established a list on November 24, 2023. In which they have listed a total of 75 brokers which are not legal for Forex trading in India and it includes all your favorite brokers whether it is Axis or OctaFX or even MetaTrader 4."
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Violating RBI policies in forex trading can lead to jail time and is considered a non-bailable offense.
"if you violate the policies of RBI then you can be jailed and it is a non-bailable offence."
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The 1999 Foreign Exchange Management Act (FEMA) prohibits sending Indian money abroad or converting it into other currencies.
"The Foreign Exchange Management Act, which came into force in 1999, prohibits ending Indian money outside India, nor sending Indian money outside India, nor can you convert Indian money into any other currency."
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There are two primary ways to legally trade forex in India: through Indian brokers offering specific currency pairs, and a 'jugaad' (workaround) method.
"Look, there are two legal ways to trade in forex. The first is that you have some Indian brokers who provide you the option to trade in forex currencies in pairs. This is the more legal way. The second is a slightly more jugaad way."
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The daily trading volume in the forex market is $6 trillion, significantly exceeding the monthly volume of the stock market.
"The volume in forex currency is 6 trillion dollars a day, which is not even the monthly volume of our stock market."
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Indian brokers like Zerodha and Injal One offer forex trading with INR, limited to 4-6 currency pairs such as EUR/INR and USD/INR.
"if you go on Zerodha or if you go on Injal One broker, whichever one it is, then if you go there, you will find all the transactions related to INR, that is, in coherence with IR. You will get as many currency pairs as there are, meaning you basically get four to five or six currency pairs, and Major Lire, Euro, EUR, IR, USD, IR, so you get four to five currencies, six currencies."
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A vast majority of forex traders in India (almost 99-100%) use foreign brokers.
"99 or even 1 lakh people do whatever they do on foreign brokers only, like exchanges, this or that dim kana, you only know."
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The RBI published a list of 75 illegal forex brokers, including notable names like Alpari, Binance Mo, and Accenture.
"the RBI released in an article where there's a list of 75 brokers. Okay, in which there are many names like Alpari. Alpari is a famous broker. I don't know, you guys know it or not. There are names like Binance Mo. Then there's Accenture, which is at number six. That's the first thing to note."
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OctaFX is listed as an illegal forex broker in India at number 27 on the RBI's list.
"Then there's 4x Octa F, which is at number 27. I thought Octa F was at the top."
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MetaTrader Four and MetaTrader Five are also included in the RBI's list of unauthorized forex trading platforms.
"After that, you'll see MetaTrader Four and MetaTrader Five."
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Entities on the RBI's alert list are not authorized under FEMA to deal in forex or operate electronic trading platforms, making trading on them illegal.
"The alert list contains names of entities which They are neither authorized to deal in forex under the FEMA Act nor authorized to operate electronic trading platforms (ETPs). Trading on these platforms is not allowed under the FEMA Act."
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A broker not appearing on the RBI's list of illegal entities does not automatically mean it is legal for forex trading in India.
"if a name is not in this list, it does not mean that it is legal. Well, this means that if the broker's name is not in this list, then it is not legal directly."
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Legal forex brokers in India must be RBI regulated and SEBI registered, offer only 4-5 currency pairs, and these pairs must be related to the Indian Rupee (e.g., USD/INR, EUR/INR).
"If your brokers are RBI regulated and SEBI registered, you will be able to trade with those brokers and only four or five options should be visible on them. If you see more than four or five options, then it is not legal. But you know SEBI and RBI. Simply put, all of the currency pairs should be related to Indian Rupees, that is, INR, USD, EUR, JPY, IR. Only then will it be legal."
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A 'jugaadu' method for forex trading involves converting Indian Rupees to cryptocurrency and then converting that cryptocurrency to other forex currencies like USD or EUR.
"first exchange the Indian currency into some crypto currency and then we can convert the crypto currency into some other currency, that is, USD forex currency, which is our USD Euro JPY. We can change it in this."
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Since crypto has become legal in India in the last 1-2 years, using it as an intermediary for forex transactions is considered a 'jugaadu' but potentially viable method.
"But if you are legalizing crypto, which crypto has just become legal. Finally, in the past one or two years, it is moving a little towards a legal method. That is, when crypto has become legal, then putting it in crypto, then you do anything with crypto."
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Individuals who deposit money directly from their bank accounts to forex brokers risk having their bank accounts frozen, and this risk persists.
"in the middle, some people's bank accounts were frozen. Whatever people did, whatever they did, they If they were trading in forex and were depositing money directly from their bank account into a forex broker, for example, their bank accounts were getting frozen. So, this still happens. There are chances that it could happen."
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Buying crypto with Indian Rupees from a bank account and then depositing that crypto into a forex exchange is a loophole that bypasses direct bank transfers and is considered 'totally okay'.
"if you buy any crypto from the same Indian bank account and then deposit the crypto into your exchange, then that is totally legal. That is totally okay. That means it is legal. This is a loophole."
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Directly depositing funds from a bank account to a forex broker is highly likely to result in the bank account being frozen.
"if you deposit money directly from your bank account into a forex broker, your bank account will be frozen, or it could be. So, keep this in mind: if any foreign broker or forex broker gives you the option to deposit money directly from your bank account, then you should not do that, because your bank account will definitely be frozen, and any money in it will also be frozen."
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Penalties for illegal forex trading can include a daily fine of ₹100 and a penalty up to four times the profit generated.
"It is as good as ₹100 per day. If you trade even in a single day, you will be fined ₹100. And if you have generated income, for example, you have to pay a penalty of three times four times the profit you have generated. You have to pay four times the penalty."
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Failure to pay penalties for illegal forex trading can lead to a non-bailable offense.
"And if you are unable to pay the penalty, then you will have to pay a non-bailable penalty. Offense is also considered an offense."
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As of the transcript's recording, there have been no arrests for forex trading in India, though violating RBI guidelines could potentially lead to such action.
"No, if so, has anyone been arrested to date? No, there have been no arrests to date. If you exploit too much and violate some illegal RBI guidelines, there are chances, but it's not 100% sure because no one has been arrested for forex."
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Funded accounts are presented as another legal method for forex trading in India, with a dedicated video planned for future discussion.
"And there's another way to trade Forex legally, that's through funded accounts. Okay, we won't discuss the third method, which is funded accounts, in this video. We will make a completely separate video on it: The Best Legal Way to Trade Forex in India."
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