forex trading legal or illegal

Is Forex Trading Illegal in India?

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When we talk about forex trading, it is becoming very popular but at the same time there is a huge confusion among traders: is forex trading illegal in India, forex trading in India legal or illegal, and why is forex trading illegal In India?

For getting answers to these important questions, traders must have a clear understanding of forex trading and its rules. In this article we will learn about the status of forex trading in India and will find the answers to is forex trading illegal in India, is forex trading legal in India, and why forex trading is illegal in India? 

To understand is forex trading illegal in India or not, we should know that the Forex market is the biggest decentralized global market where all currencies in the world are traded. When coming to India, many people doubt is forex trading legal in India or not. So let’s discuss the legality of is forex trading legal in India. 

Forex Trading in India Legal or Illegal?

The exchange of foreign currencies in India is legal and the answer to the question is forex trading illegal in India is a No. Investors are often under the impression whether is forex trading in India legal or illegal because the government of India keeps a tight leash on the on-goings of forex trading rules in India. 

We often hear the question, “is forex trading in India legal or illegal?” or the more misunderstood one, “why is forex trading illegal in India?” but the forex traders have nothing to worry about if they follow the forex trading rules in India.

Now the government has made forex trading is legal in India but much to the dismay of the investors, there is a strict check on the guidelines to keep forex trading is legal in India. This is because the government of India has allowed only a few selected currencies to be invested in India to make forex legal in India.

This is why investors get confused about whether is forex trading in India legal or illegal. The investors think why forex trading is illegal in India is because other countries do not have such strict guidelines, therefore, allowing its investors to trade freely. 

When the investors trade in the forex while adhering to the forex trading rules in India they are not allowed trading in any other currency pairs which do not involve the Indian rupee except three pairs which serve as an exception for is forex trading legal in India.

Authorized Currency Pair for Trade in India 

  • USDJPY
  • GBPINR
  • JPYINR
  • USDINR
  • EURINR
  • EURUSD
  • GBPUSD

Restrictions of the Government of India on Non-Indian Currency Pairs

The government of India has imposed so many restrictions on the currency pairs so that the forex reserves are kept safe and the question of forex trading in India legal or illegal does not arise. Forex trading is legal in India and that is only possible if the investors follow the forex trading rules in India.

The government of India has made a strict guideline of only letting the investors trade in the pairs which contain the Indian rupee is because if the forex currency gets traded in the market and not the Indian currency then the Reserve Bank of India will have to buy the foreign currency if the forex trading in India faces a loss.

Do not think that is forex trading legal in India because of the restrictions on the currency pairs. It is understandable to think that some investors, especially amateur investors, often dwell on whether is forex trading in India legal or illegal. There are many concerns of the government of India regarding forex trading in India which makes people think that forex illegal in India. 

One of the concerns is that if the investors do not succeed in forex trading, because it carries a huge potential risk then the government will also have to face severe losses. That is why forex is legal in India but with some strict forex trading rules in India.

The question of whether is forex trading in India legal or illegal has arisen after many decades. Decades ago it was out of the question and there was a time when forex illegal in India. Before the era of 1999, Indians were not even allowed to hold foreign currency pairs in their hands according to the FERA Act 1973. Now that the government has made forex trading is legal in India, people can question if forex trading in India legal or illegal.

4 Things Investors Must Know Before Investing

Here are 4 important things that investors should need to know before investing are:

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1. Forex Trading is legal in India

How is forex trading legal in India? Forex trading is legal in India only when it involves INR to be either the base currency or the quote currency. Let’s understand the question “is forex trading legal in India” in detail.

When investors ask if forex trading in India is legal or illegal, the answer is that forex trading is legal in India and investors can stop worrying about the question, “is forex trading illegal in India?” The government of India has made forex trading legal in India by introducing some rules and regulations. Investors should get thoroughly educated in the area of foreign trading before they start forex trading in India. It is a good idea to get through with all the necessary information there is to learn about foreign exchange in India before stepping into a high-risk market such as forex.

The government has introduced so many rules and regulations in India that make sure that forex trading is legal in India. Forex is legal in India only if the investors trade in the currency pairs that are finalized by the government of India.

The question of whether is forex trading in India legal or illegal has arisen after many decades. Decades ago it was out of the question and there was a time when forex illegal in India. Before the era of 1999, Indians were not even allowed to hold foreign currency pairs in their hands according to the FERA Act 1973. Now that the government has made forex trading legal in India, people can question is forex trading legal in India or not.

2. Regulated Brokers are the key to Forex Trading in India

If forex trading in India is carried out through a broker, then only forex trading is legal in India. India operates differently from other nations when it comes to forex trading in India. Investors need to educate themselves about the working of the forex market in India. After the investors are thoroughly informed about the subject only then will they be able to forex trade in India successfully through a broker who is fully regulated?

Dealing in the forex market in India can be very dangerous as it contains huge potential risks of failure for foreign exchange investors. It is very important that the investors keep themselves and their dealings in check and make sure they are doing everything that comes under the law. 

Any mishappening can result in huge failures and punishment by the government of India. There is a possibility of forex being illegal in India if the investors do not abide by the forex trading rules in India and try to trade through unregulated brokers in India. According to the Security Exchange Board of India and the Reserve Bank of India, it is illegal to trade through a broker who is not regulated and if any investor is caught doing the same will face a harsh punishment of imprisonment by the government of India.

3. Drivers that Regulate Forex Trading in India

Forex trading in India is not only regulated by the investor who trades in the foreign exchange market but also some of the factors that drive the forex market. The foreign exchange traders indulge in the buying, selling, and exchange of currency pairs that also help in determining the exchange rate of the currencies.

4. Strategies of Forex Trading in India

There are 3 forex trading strategies in India which are listed below:

  1. Day Trading – One of the strategies of forex trading in India is day trading. Just like the name suggests, the investors attempt to invest by purchasing and selling their currency pairs the very same day.
  2. Scalping – Forex trading in India involves another strategy in which the traders try to make several small trades repeatedly.
  3. Position Trading – Under this forex trading strategy, the trader buys a currency and tries to keep it for as long as he can. When the investors research the market thoroughly their currencies can even earn a considerable amount of profit when the investors sell them.

Is Forex Trading Legal in India 2021?

The answer to the question is forex trading legal in India is a Yes. It is regulated by the Reserve Bank of India and the Securities and Exchange Board of India, the government of India has ensured that forex trading stays legal in India. So that forex trading stays legal in India the government of India has ensured that all the foreign exchange dealings are carried out by only those brokers who have regulated and all the foreign exchanges that are carried out by the investors are under the surveillance of the Reserve Bank of India and the Securities Exchange Board of India. 

The brokers who work under the jurisdiction of the Reserve Bank of India are directed according to the FEMA Act of 1999. The investors can only sign up with the regulated broker show work under the Securities and Exchange Board of India according to the FEMA Act of 1999. 

It is important to take into consideration that if an investor decides to illegally trade through a broker who is not regulated or not a broker who works under the Securities and Exchange Board of India, then it will be considered an offense for which the investor should be punished for. The investors will face a harsh punishment of imprisonment by the government of India.

Investors need to educate themselves about the working of the forex market in India. After the investors are thoroughly informed about the subject only then will they be able to forex trade in India successfully through a broker who is fully regulated? The investors will also be informed about all the rules and regulations that the Securities and Exchange Board of India expects their foreign traders to follow. 

There will be no problems to the Investors who engage in forex trading in India if they just stay within the forex trading rules in India. When investing in foreign exchange, investors should put their Indian currency as their base currency.

Why Forex Trading is Illegal in India?

We often hear the question, “Why forex trading is illegal in India?” or the more misunderstood one, “Why forex trading is illegal in India?” Answer to the question “Why forex trading is illegal in India?” Is Forex trading in India is not illegal? Let’s understand the question of why forex trading is illegal in India? In India, though, forex trading platforms are not allowed. While we can’t directly trade in the foreign exchange market, we can still trade in currencies through the stock exchange. If you are thinking about why Forex trading is Illegal in India then you are wrong. RBI and the Indian Government are also doing all this.

Is Forex Trading Illegal in India – FAQs

Q1. Is forex trading illegal in India?

Ans. We often hear the question, “is forex trading in India legal or legal or illegal?” or the more misunderstood one, “why forex trading is illegal in India?” forex trading rules in India have made the forex market very rigid but the actuality is that the government has made forex trading legal in India and the investors have nothing to worry about if they adhere to the guidelines set by the RBI and SEBI.

Q2. How has the government of India made forex trading legal in India?

Ans. Regulated by the Reserve Bank of India and the Securities and Exchange Board of India, the government of India has ensured that forex trading stays legal in India. So that forex trading stays legal in India the government of India has ensured that all the foreign exchange dealings are carried out by only those brokers who have regulated and all the foreign exchanges that are carried out by the investors are under the surveillance of the Reserve Bank of India and the Securities Exchange Board of India. 

Q3. What will happen if someone tries to engage in forex trading through an unregulated broker?

Ans. Any mishappening can result in huge failures and punishment by the government of India. There is a possibility of forex being illegal in India if the investors do not abide by the forex trading rules in India and try to trade through unregulated brokers in India. According to the Security Exchange Board of India and the Reserve Bank of India, it is illegal to trade through a broker who is not regulated and if any investor is caught doing the same will face a harsh punishment of imprisonment by the government of India.

Q4. Is forex trading illegal in India? If so, then why has the government of India imposed so many restrictions on them? 

Ans. The government of India has imposed so many restrictions on the currency pairs so that the forex reserves are kept safe and the question of forex trading in India is legal or illegal does not arise. Forex trading is legal in India and that is only possible if the investors follow the forex trading rules in India.

Q5. What strategies can be followed by the new traders to ensure that they receive good returns on their investments in the forex market?

Ans. There are a few basic strategies of Forex Trading in India that can be followed by new investors in India:

  • Day Trading – One of the strategies of forex trading in India is day trading. Just like the name suggests, the investors attempt to invest by purchasing and selling their currency pairs the very same day.
  • Scalping – Forex trading in India involves another strategy in which the traders try to make several small trades repeatedly.
  • Position Trading – Under this forex trading strategy, the trader buys a currency and tries to keep it for as long as he can. When the investors research the market thoroughly their currencies can even earn a considerable amount of profit when the investors sell them.
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