The Forex Market has intrigued many NRIs all over the globe. It is the only market that functions 24 hours a day except for the weekends and provides one of the best possibilities of returns. The Foreign Exchange Market, as we know it, has an average daily turnover of more than USD 6.6 Trillion. Now, many NRIs want to know how they can participate in Indian Forex Trading and understand the fundamentals of what’s illegal and what’s legal. In this article, we will understand what aspects of forex trading in India can an NRI opt for and what they can not. Let’s Begin!
Forex India: An Overview of the Market
There are certain pointers that you need to understand. These pointers will serve as a fundamental base for Forex Trading in India. Let’s take a look:
- Forex Trading always happens in pairs of currencies (eg. USD-INR, EUR-INR etc.)
- There is no central location for the forex market. It is connected globally via a network of traders
- The currency is bought at a “bid” price and sold at “ask” price
- The difference between bid and ask is known as spread
- A PIP or Point in Price is the smallest change in the exchange rates of the currency pair
- The currency market deals in lots as opposed to stocks where you can buy just 1 share
- You can use leverage to trade more than what you have in your trading account
Indian Forex Trading: Legal vs Illegal (for Resident Indians)
| Legal | Illegal |
|---|---|
| Trading in MCX-SX, BSE, NSE currency segment via registered brokers | Overseas Forex Trading; sending money to foreign brokers |
| You can only trade foreign currency paired with INR (4 pairs are allowed: USD-INR, EUR-INR, GBP-INR, JPY-INR) | As per RBI circular RBI/2013-14/265 A.P. (DIR Series) Circular No. 46 Overseas forex trading through electronic or internet trading portals not permitted. |
| Using normal banking channels | Using Internet Banking or Credit Cards for overseas forex trading |
Is Forex Trading legal in India for an NRI?
Many NRIs have been asking the same question: “Is Forex Trading legal in India”. Well, the direct answer is NO! An NRI can’t trade in the currency or MCX commodity futures in India.
As a Resident, you can derive from the table above that what is legal and what’s not. Making it simpler, Forex Trading in the allowed 4 pairs under the MCX-SX, BSE, NSE currency segment via registered brokers will have no legal barriers whereas if you choose to trade in overseas foreign exchange market through brokers who are residing abroad using your Indian banking infrastructure (net banking, credit cards), then it becomes illegal under the purview of the Foreign Exchange Management Act (FEMA), 1999 besides being liable for violation of regulations relating to Know Your Customer (KYC) norms OR Anti Money Laundering (AML) standards.
Currency Trading in India for NRI: Why is it illegal?
You can’t opt for currency trading in India as an NRI because of the speculation around such investments. Investment segments like Forex are used to huge inflow of money and frauds and are much more volatile than the equity segment. The very same reason explains why NRIs can’t do day-trading in India. Even the investments by NRIs in the secondary markets are routed through the PIS route so that the RBI can keep track of such investments.
Remember this: NRIs are only allowed to INVEST in Indian Markets. They aren’t allowed to do speculative trading.
How to open Forex Trading Account?
As a Resident Indian, if you want to trade in the Indian Forex Market, then it becomes essential that you understand how and where to start. The basics of how to open a forex trading account and other aspects need to be addressed carefully. Now, with SBNRI, you can jump onboard and start Forex Trading with our partner Zerodha. The process is easy and can be done in under 10 minutes.
NRIs! if you need to contact an expert to learn about alternatives available for investment in India then just click on the button at the end of the article to get in touch with our expert directly on WhatsApp and start exploring the benefits instantly.
Forex India: What NRIs often ask?
In this segment, we will look at some of the top questions NRIs ask to our experts. Let’s answer them in two lines for a brief understanding. For detailed information, you can always get in touch with our experts. They will provide you with customized solutions as per your specific needs.
Is Forex Trading legal for NRI?
No. As an NRI, you can’t trade in the Indian Currency Market. Currency Trading in India is illegal for NRIs because of the speculation around it.
Can NRI do day trading?
No. NRIs can’t do day trading in India.
RBI rules for forex trading in India?
As per the guidelines of the Reserve Bank of India (RBI), NRIs aren’t allowed to do forex trading in India. However, a Resident Indian can trade in the MCX-SX, BSE, NSE currency segment via registered brokers.
Best Forex Trading Platform in India
Since, as NRIs you can’t trade in forex in India. You might want to explore the best investment options for NRIs in India as an alternative. Also, you can get in touch with our expert directly on WhatsApp using the button below for any queries/doubts you might have. You can visit our blog or Youtube Channel for more information.
FAQs
Yes, forex trading is much more risky and volatile than the stock market.
Yes. An NRI can open a demat account in India. They can even hold both repatriable and non-repatriable demat accounts.
A PIS Account is mandatory for NRIs if they are investing in the secondary market. For primary market investments in India, a PIS account isn’t mandatory.
Yes. NRIs can trade in the derivatives market. As per RBI regulations, an NRI may invest in exchange traded derivative contracts approved by SEBI from time to time out of INR funds held in India on a non-repatriable basis subject to the limits prescribed by SEBI.
No. It is illegal for an NRI to hold a Resident Savings Bank Account in India. They need to convert their savings account into an NRO Account as soon as their residential status changes to an NRI.
Yes. An OCI/PIO can invest in shares in India as they are given parity with NRIs in terms of financial aspects.
