In this article, we answer the age old question: “Is Forex Trading Legal in India?”. We analyze the restrictions on forex trading in India, and how Indian Nationals can trade forex legally and fully.
Forex Trading is legal in India, however, India is one of the few countries in the world where forex trading is strictly regulated. The Securities and Exchange Board of India (SEBI) only permits Indian Nationals to trade forex with a regulated local broker on Indian Exchanges (NSE – National Stock Exchange of India, BSE – Bombay Stock Exchange, MSE – Metropolitan Stock Exchange) and the only options for currency trading allowed are against the Indian Rupee (INR).
This means that the regulated Indian brokers that Indians can open accounts with, only allow them to trade currency pairs that are trading against the Indian Rupee, and their account base currency is also in INR. They cannot trade the most liquid pairs in the forex market such as the EURUSD, USDJPY, and so on. In fact, they cannot trade any of the 7 major currency pairs. The most common pairs allowed to be traded for Indians are: USDINR, GBPINR, EURINR, and JPYINR.
Trading non-Indian currency pairs is a serious civil offence which is non-bailable under the Foreign Management Act, 1999 (FEMA).
Why is Forex Trading illegal (or limited) in India
Several people are curious behind the logic of forex trading being banned in India considering it is a net services exporter. This means that India exports more services than it imports. Currently, the net surplus of services exports from India is $81 billion in 2019-2020, up from $70 billion in 2017-2018. However overall, India has a negative balance of trade, and a Foreign Exchange Reserve of $420 billion in 2020.
The declared logic behind limiting forex trading in India is that the Reserve Bank of India needed to protect their reserves by not allowing free outflow of USD against the INR. An example of this case would be if an Indian National has an account base currency in USD and loses a trade on EURUSD, he would be buying more USD in India by exchanging INR, to send it abroad to refill his account.
How to trade ALL currency pairs in India legally
We can suggest a way for Indian Nationals to easily access forex markets and that too legally and thus morally.
We are partnered with Arch Investments which manages www.blufx.pk
BluFX Pakistan offers fully funded trading accounts to Indian and Pakistani nationals alike for a flat monthly fee. For a fee equivalent to GBP 99 they offer a Lite Account with a trading balance of USD 25,000. This account permits a maximum drawdown of 10% – meaning, your account would be terminated if your account balance hits $22,500. However, all profits that you make above 5%, are withdrawable on a 50-50 split. Meaning, if your account balance reaches $26,250, you are entitled to withdraw $625. This profit sharing split is because you have no risk while trading – any losses you make are covered by BluFX Pakistan, and all you’ve risked is the monthly account fee.
BluFX Pakistan also offers a $50,000 account for trading that can be grown to larger account sizes. The monthly subscription fee is the equivalent of GBP 250, and once the account size increases 10%, they upgrade you to a $100,000 account. Once again, if you increase the account size by 10%, you will be given a $200,000 account. And next, a $1 million account!
You may trade more than just the major currency pairs with BluFX Pakistan legally from India, as you are only paying a subscription fee and are not directly funding a brokerage account.
To register and view more information, you can visit www.blufx.pk
To read our full traders guide to prop (funded) trading, see our article here: Traders Guide to Prop Trading