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. What are the prohibited items under the Scheme? 1. Remittance for trading in foreign exchange abroad?

. What are the prohibited items under the Scheme? 1. Remittance for trading in foreign exchange abroad?

Postby isidoro » Mon Feb 04, 2013 3:36 pm

1. The Reserve Bank of India's Scheme for Forex Facilities for Residents (Individuals) is available at the following site:

http://www.rbi.org.in/scripts/FAQView.aspx?Id=53

2. As regards the prohibited items under the scheme, the scheme reads as under:

"Q. 30. What are the prohibited items under the Scheme?

Ans. The remittance facility under the Scheme is not available for the following:

i) Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery tickets/sweep stakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000;

ii) Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty;

iii) Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market;

iv) Remittance for trading in foreign exchange abroad;
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v) Remittance by a resident individual for setting up a company abroad;

vi) Remittances directly or indirectly to Bhutan, Nepal, Mauritius and Pakistan;

vii) Remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and territories”, from time to time; and

viii) Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.






3. The undernoted circular of Reserve Bank of India governs trading in foreign exchange:

http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=6336

3. Briefly, the provisions of the scheme are as:

3.1 A person resident in India may enter into a foreign exchange derivative contract in to hedge an exposure to risk in respect of a transaction permissible under the Foreign Exchange Management Act (FEMA), 1999 or rules or regulations or directions or orders made or issued thereunder.

3.2 A person resident in India may enter into currency futures or currency options on a recognised stock exchange to hedge an exposure. A derivative transaction is only permitted based on the presence of an underlying price risk exposure for which purchase and/or sale of foreign exchange is permitted under FEMA, 1999.

3.3 Remittances under the Liberalised Remittance Scheme are allowed only in respect of permissible capital or current account transactions or a combination of both. All other transactions, which are otherwise not permissible under FEMA, 1999, including the transactions in the nature of remittance for margins or margin calls to overseas exchanges / overseas counterparty, are not allowed under the Scheme.


3.4 Overseas forex trading through
electronic / internet trading portals:
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3.4.1. Overseas foreign exchange trading has been introduced on a number of internet /electronic trading portals luring the residents with offers of guaranteed high returns based on such forex trading. The advertisements by these internet / online portals exhort people to trade in forex by way of paying the initial investment amount in Indian Rupees. Some companies have reportedly engaged agents who personally contact people to undertake forex trading/ investment schemes and entice them with promises of disproportionate / exorbitant returns. Most of the forex trading through these portals are done on a margining basis with huge leverage or on an investment basis, where the returns are based on forex trading. The public is being asked to make the margin payments for such online forex trading transactions through credit cards / deposits in various accounts maintained with banks in India. It is also observed that accounts are being opened in the name of individuals or proprietary concerns at different bank branches for collecting the margin money, investment money, etc.

3.4.2 Any person resident in India collecting and effecting / remitting such payments directly /indirectly outside India would make himself/ herself liable to be proceeded against with for contravention of FEMA, 1999 besides being liable for violation of regulations relating to Know Your Customer (KYC) norms / Anti Money Laundering (AML) standards.

4.Please read the RBI cirular for full details.

.
isidoro
 
Posts: 46
Joined: Thu Oct 04, 2012 12:09 am

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