Mumbai (Maharashtra) [India], April 25 : The Reserve Bank of India (RBI) has issued a directive to banks regarding instances of unauthorized forex trading activities by certain entities.
RBI has directed banks to report to the Directorate of Enforcement (ED) of any account being used to facilitate unauthorized forex trading action.
The RBI has noted that some entities are offering forex trading facilities to Indian residents, promising disproportionate or exorbitant returns.
Upon investigation, it was found that these unauthorized entities engage local agents to open accounts at various bank branches to collect money for margin, investment, and other charges. However, the transactions in these accounts do not align with the stated purpose for opening them.
"The Reserve Bank of India (RBI) has come across instances of unauthorised entities offering foreign exchange (forex) trading facilities to Indian residents with promises of disproportionate/exorbitant returns" RBI notification said
The notification further adds "On investigation, it has been observed that to facilitate unauthorised forex trading, these entities have taken recourse to engaging local agents who open accounts at different bank branches for collecting money towards margin, investment, charges"
Furthermore, these entities are facilitating unauthorized forex transactions by allowing residents to remit or deposit funds in rupees using domestic payment systems like online transfers and payment gateways.
To curb such activities, the RBI has emphasized that no person should deal in or transfer any foreign exchange or foreign security to any entity not authorized by the RBI, except under general or special permission.
"RBI directs that no person shall deal in or transfer any foreign exchange or foreign security to any person not being an 'Authorised Person', unless under general or special permission of the Reserve Bank "said RBIs notofication
The RBI has also stated that no entity should operate an Electronic Trading Platform (ETP) without obtaining prior authorization from the RBI. Additionally, banks are urged to exercise greater vigilance and caution in this regard.
Moreover, banks are advised to inform their customers to engage in forex transactions only with authorized persons and on authorized ETPs. The RBI has urged banks to widely publicize the list of authorized persons and authorized ETPs available on its website.
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