RBI issues red alert on illegal entities in forex market

MUMBAI — The Reserve Bank of India (RBI) on Wednesday issued an alert against unauthorised entities offering foreign exchange (forex) trading facilities to Indian residents with promises of exorbitant returns.

The RBI has asked all banks to refer to an “alert list” which mentions the names of entities that are not allowed to undertake forex transactions and to inform their customers as well.

An RBI investigation has revealed that to facilitate unauthorised forex trading, these entities have taken recourse to engage local agents who open accounts at different bank branches for collecting money towards margin, investment, charges, etc.

These accounts are opened in the name of individuals, proprietary concerns, trading firms etc. and the transactions in such accounts are not found to be commensurate with the stated purpose for opening the account in several cases.

It is also observed that these entities are providing options to residents to remit/deposit funds in rupees for undertaking unauthorised forex transactions using domestic payment systems like online transfers, payment gateways, etc.

The RBI has directed banks to advise their customers to deal in forex only with ‘authorised persons’ and on ‘authorised ETPs’ and give wide publicity to the list of ‘authorised persons’ and the list of ‘authorised ETPs’ available on the RBI website.

AD Cat-I banks have also been advised to give publicity to the ‘alert list’ and press releases issued by the RBI in this regard.

The RBI letter states that there is a need for greater vigilance to prevent the misuse of banking channels in facilitating unauthorised forex trading.

“AD Cat-I banks are, therefore, advised to be more vigilant and exercise greater caution in this regard. As and when AD Cat-I banks come across an account being used to facilitate unauthorised forex trading, they shall report the same to the Directorate of Enforcement, for further action, as deemed fit,” the letter states.

The RBI has reminded banks that no entity shall operate an Electronic Trading Platform (ETP) without obtaining prior authorisation from the Reserve Bank of India.