RBI Cautions Against 34 Unauthorised Forex Trading Platforms

The Reserve Bank of India (RBI) has issued a public advisory cautioning the general public against undertaking forex transactions on unauthorised electronic trading platforms (ETPs).

The central bank has also warned people that depositing money for unauthorised transactions would invite action under the Foreign Exchange Management Act (FEMA) norms.

“Members of the public are once again cautioned not to undertake forex transactions on unauthorised ETPs or remit/deposit money for such unauthorised transactions. Resident persons undertaking forex transactions for purposes other than those permitted under the  FEMA or on ETPs not authorised by the RBI shall render themselves liable for legal action under the FEMA,” said the RBI in a press statement.

In a bid to raise awareness, the RBI has also unveiled an ‘Alert List’ comprising of entities which are neither authorised to deal in forex nor authorised to operate as ETPs for forex transactions. 

The list has been put up on the RBI website and includes many 34 names including Olymp Trade, OctaFX and iFOREX.

Other platforms that are in the dock for being ‘unauthorised’ include Binomo, Forex.com, XM, XTB, among others.

While RBI has clearly ascertained that these platforms are not authorised, these companies continue to offer ads targeted at Indians on Google searches. 

RBI On A Regulatory Overdrive

This is not the first time that the central bank has issued an advisory in the matter. In February too, RBI had issued clear guidelines against unauthorised forex trading platforms. 

The new circular comes in the backdrop of a slew of cases that have drawn attention to these platforms. In March, complainants from Bengaluru to Nagpur approached the Indore Police in a forex trading advisory fraud whereby 25 people duped of lakhs of rupees each by the accused. 

Later in May, a Pune man was cheated of INR 21.66 Lakhs by two accused who lured him into investing in their non-existent forex trading firm, promising high returns. 

A plethora of cases emanating from every nook and corner of the country appears to have caught the attention of the central bank.

This is part of a larger regulatory crackdown by the RBI on new age digital platforms. Earlier last month, it unveiled the new digital lending guidelines to curb growing unruly collection practices employed by loan sharks and to put in place a regulatory framework for the burgeoning space.

Prior to that in July, the RBI also put a damper on many emerging startups after it barred non-bank fintech startups from loading PPI wallets with credit lines. The immediate aftermath saw Uni Card temporarily suspending card services for its products. 

The subsequent proceedings saw reports emerging of State Bank of Mauritius India reportedly mulling pausing the onboarding of new customers for prepaid cards. Later, the RBI also slapped a fine of INR 5.93 Lakh on fintech firm Obopay Mobile Technology for non-compliance with the same set of rules. 

In August, the central bank also fined fintech player Jupiter Capital INR 82 Lakh for breach of norms on submission of credit information. In the month prior, it also imposed a fine of INR 1.67 Cr on Ola Financial Services for non-compliance with KYC guidelines.

From its recently announced Payments Vision 2025 to the digital lending guidelines, the RBI has issued a slew of measures to give more control of the data to the Indian borrowers or users. As if this was not enough, the central bank also said that it will explore options to ring-fence the domestic payments system and mandate domestic processing of payments solutions.

These have complicated compliance issues for fintech players and appear to have imposed increased tech standards for these startups. Despite this, the fintech startups continue to look for a play in the highly competitive space.

An Inc42 report pegs India’s total addressable fintech market opportunity to reach $1.3 Tn by 2025.