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Reserve Bank Of India Is Against The Use Of The Forex Limits To Trade-In Dollars

The Reserve Bank of India (RBI) has cautioned against the use of its liberalised remittance scheme (LRS), which allows individuals to send up to $250,000 abroad annually, to trade in forex platforms. RBI’s caution comes at a time when remittances under the scheme are picking up. They reached almost $2 billion a month in August and September 2021.

The central bank has said that there are unauthorised electronic trading platforms (ETPs) that have engaged agents to lure people to undertake forex trading with promises of ‘exorbitant returns’.

“Further, there have been reports of frauds committed by such unauthorised ETPs / portals and many residents losing money through such trading/schemes,” the central bank said. It added that these schemes are being pushed through social media platforms, search engines, gaming apps and over-the-top platforms.

The RBI has said that while permitted forex transactions can be executed electronically, they should be undertaken only on ETPs authorised for the puNSE, BSErpose by the central bank or on recognised stock exchanges (NSE, BSE and Metropolitan Stock Exchange of India).

September 2021, the latest month for which data is available, saw the highest level of remittances under the LRS at $1,970 million. The jump was largely on students buying dollars for studies overseas ($718 million). This was followed by $580 million spent on international travel in the same month. The third major head was remittance towards gifts ($210 million).

Last month, Sebi had asked mutual funds to stop further investments into foreign equities to avoid breach of industry-wide overseas limits. This was followed by the Association of Mutual Funds of India capping individual MFs’ overseas investment limit. Many investors have been looking for other avenues to invest in dollar assets.

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Harsh V Singh

Harsh V Singh

Manager - Creative Content.

An avid book reader and a traveller.

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