Investment 101 – Is forex trading legal in India?
Trading in international currencies is known as Forex trading. The rate of the exchange of the currencies keeps on fluctuating and the same can be used by investors to gain appreciation in short term investments.
The forex trading market in India
India sees the global forex trading as a threat to its sovereignty. For this, the government of the nation has a limited forex trading. Investors often enquire – Is forex trading legal in India?
The answer is yes. Up to some extent.
In December 2015, The Reserve Bank of India permitted exchange of currencies, options, and futures in the following Currency pairs –
- GBP – USD
- EUR – USD
- USD – JPY
Explanation of the legality of the foreign exchange trading in India
Investors who wish to delve into detail about the question – Is forex trading legal in India can get all the answers in this blog –
Trading in the forex market is done based on the margin trading principles. This means that you can trade in smaller deposits for a larger value. RBI under Liberalized Remittance Scheme had earmarked an amount of 2 lac INR which presently is reduced to 70 to 75 K INR.
Legal route to forex market and exchange benefits
The best way to trade in the Forex market is through a SEBI dealer. It is vital that such a person must be registered with the above to deliver the best results for your needs. A list of all such dealers is available at the SEBI official website.
All such transactions in foreign exchange must be done as per the directives issued by Reserve Bank of India from time to time.
Exchanges in forex trading
Forex trading is carried out through the registered traders. The most popular exchanges are –
- National Stock Exchange or NSE
- Bombay Stock Exchange or BSE
- Multi Commodity Exchange or MCX-SX
At international level, COMEX is used as a market regulator.
Risk associated with foreign exchange
India does not allow physical delivery of the foreign exchange post due date. Instead virtual trading in the same is considered.
Trading in this market is highly risky and may not be conducive to all investors and their needs. Therefore, before moving ahead, you must get relevant information about the same, your investment objective, technique and risk bearing capacity
Thus, before making a move into the forex trading market, it is better to take advice from a financial advisor to get the right results.