 "RBI cracks down on online offshore FX trading by Indians")
The RBI cracked down on offshore foreign exchange trading by Indians through online trading websites, asking banks to report any such remittances to the regulator.
In a circular issued late on Tuesday, the Reserve Bank of India (RBI) asked banks to advise customers not to undertake forex trading on foreign websites that offer currency contracts by accepting margins through credit card and online money transfer mechanisms.
The RBI also asked banks to close the credit card or online bank account of a customer that is found to be in violation of the rule.
As and when any bank comes across any prohibitedtransaction undertaken by its credit card or online bankingcustomer, the bank will immediately close the card or accountof the defaulting customer, the Reserve Bank said in anotification.
[caption id=“attachment_1116371” align=“alignleft” width=“380”]  AFP[/caption]
If it is observed that the bank concerned has failed tocarry out the measures as outlined above, RBI may proceedagainst the defaulting bank, it said.
Some banking customers continue to undertake onlinetrading in foreign exchange on portals or websites offeringsuch schemes wherein they remit funds from Indian bankaccounts using credit cards or other electronic channels tooverseas websites or entities, the central bank observed.
Subsequently, cash refunds are received from the sameoverseas entities into their credit card or bank accounts, itadded.
Most of the forex trading through portals are done on amargining 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 forsuch online forex trading transactions through credit cards ordeposits in various accounts maintained with banks in India.
The rupee has been hard hit in this summer’s rout of emerging currencies, losing around 20 percent of its value against the dollar at one point, and significantly increasing the burden of Indian companies’ dollar debt.
The central bank has been trying to curb the offshore rupee market by asking banks to cut down on overnight positions as well as asking foreign institutional investors to produce documentation from clients in order to hedge their currency risk in the onshore forward markets.
The central bank has already reduced the limit for remittances made by residents to $75,000 from $200,000 per financial year.
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