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What Is Forex Trading & How to trade forex in India?

Seeking answers to what is currency trading in India? Or confused about how to carry forex trading legally in India? Well, foreign exchange is the largest decentralised global market where every currency in the world is traded. Currency trading in India is the most fluid market in the world, however, the legal status of forex trading in India is still a large question and majority do not know the answer. So, here we give you an insight into forex currency trading in India through our blog.
Written by:
Apeksha Pandita
Published on
12th Sep, 2019

Have you searched through multiple platforms online and not yet found where is it legal to trade in foreign exchange in India? Well, forex trading is also familiar to some people as Currency Trading in India. Indian forex trading is very similar to equity trading. You see, in equity trading rate of share matters while in forex trading exchange rate matters.

Forex trading is the exchange of one currency for another. It's always done in the pair of currencies with one currency called 'base currency' and the other called 'quote currency.' One must take into consideration the risk factor of trading.

What is Forex Trading?

Forex Trade takes place in the global market known as the Foreign Exchange market for currency trading, where one foreign currency trading in India is done for another. For instance, if the forex trader resides in India and wants to trade Rupee with Dollar, therefore the base currency here would be, Indian National Rupee (INR), whereas the quote currency would be Dollar. Since base currency is usually the domestic currency of the country where the forex trader resides. Similarly, the other currency is the quote currency, which is usually the currency of another country.

In order to trade currency in India, you need to first know the rules, regulations, and law that governs it. Next, let's understand the legal status of forex. India has established its trading partially legal, while partially illegal. 

Is Online Currency Trading in India legal?

The answer is - No - to the most asked question - "Is trading forex legal in India?" 

No Indian citizen can undertake forex trading in India through any electronic or online forex trading platform. The RBI had issued a circular in 2013 prohibiting overseas forex trading through electronic or internet trading portals.

However, there is a subjective situation where the answer to "Is trading in forex legal in India?" actually is Yes! You may ask where?

Well, forex trading is legal only when one does it through forex trading platforms and the base currency is INR. Under the Foreign Exchange Management Act (FEMA), 1999 or FEMA Act, you can face imprisonment or a fine can be imposed on you for illegal forex trading in India. However, an important thing to note here is, that there is no prohibition for NRIs to do foreign exchange trading in India.

So, Forex Trading in India is Legal or Illegal?

“Is forex trading legal in India and how to trade forex in India legally?” are the questions which have been the point of pressure for people dealing in foreign exchange. To inform you better, forex trading is legal in India, only if you do it through registered Indian forex brokers. However, a forex trade between two foreign currencies is illegal in India.

In India, forex trading is legal if the base currency is The Indian Rupee (INR). This means if any Indian forex traders does overseas forex trading from India, then it is illegal. Indian citizens are not allowed to send funds overseas to foreign exchange brokers both directly and indirectly. However, depending on certain conditions, you can carry off the process of currency trading. India may have set some rules, but it's subject to the agreements signed between India and other countries.

trading forex in India

 

How to do Forex Trading in India?

Before answering your queries to "How can I Trade Forex in India?", you should know that the central authorities, which regulate India forex trading are the Reserve Bank of India (RBI) and Securities Exchange Board of India (SEBI). The National Stock Exchange (NSE) and Metropolitan Stock Exchange of India (MSE) are the commonly used stock exchanges in India.

The first step in forex trading is to open a forex trading account in India with a SEBI registered forex broker. Once the account is set up, a person i.e. a forex trader can trade in future and options currency derivatives.

There are two types of accounts - the personal account and business or corporate account. Therefore to do forex business in India, the currency pair has to be like US Dollar and INR, Euro and INR, Great Britain Pound and INR, JPY and INR, etc.

currency trading in India

 

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