RBI/2013-14/265
A.P. (DIR Series) Circular No. 46
September 17, 2013
To
All Category - I Authorised Dealer Banks
Madam/ Sir,
Overseas forex trading through electronic / internet trading portals
Attention of the Authorised Dealer Category - I (AD Category - I) banks is
invited to
A.P. (DIR Series) Circular No. 53 dated April 07, 2011 and
A.P. (DIR
Series) Circular No. 46 dated November 17, 2011 wherein AD Category I banks were
advised to exercise due caution and be extra vigilant in respect of the margin
payments being made by the public for online forex trading transactions through
credit cards / deposits in various accounts maintained with banks in India.
Further, AD Category-I banks were also advised to exercise due caution in
respect of the accounts being opened in the name of individuals or proprietary
concerns at different bank branches for collecting the margin money, investment
money, etc. in connection with such transactions.
- However, it has been observed that some banking customers continue to
undertake online trading in foreign exchange on portals / websites offering such
schemes wherein they initially remit funds from Indian bank accounts using
credit cards or other electronic channels to overseas websites / entities and
subsequently receive cash refunds from the same overseas entities into their
credit card or bank accounts.
- With a view to further strengthening the restrictions on such online
activities which are in violation of FEMA, 1999, AD Category I banks are hereby
directed as follows:
- All AD Category I banks who offer credit cards or online banking facilities
to their customers should advise their customers that any person resident in
India collecting and effecting / remitting payments directly /indirectly outside
India in any form towards overseas foreign exchange trading through
electronic/internet trading portals would make himself/ herself / themselves
liable to be proceeded against with for contravention of the Foreign Exchange
Management Act (FEMA), 1999 besides being liable for violation of regulations
relating to Know Your Customer (KYC) norms / Anti Money Laundering (AML)
standards.
- As and when any AD category I bank comes across any prohibited transaction
undertaken by its credit card or online banking customer the bank will
immediately close the card or account of the defaulting customer and report the
same to Chief General Manager-in-Charge, Forex Markets Division, Foreign
Exchange Department, Reserve Bank of India, Central Office, 5th Floor, Amar
Building, P.M. Road, Mumbai – 400001 in the format provided in the Annex to this
circular.
- If it is observed that the concerned AD category I bank has failed to carry
out the measures as outlined above, Reserve Bank of India may proceed against
the defaulting bank under section 11(3) of FEMA, 1999 and take any action as may
be deemed necessary.
- AD Category - I banks may bring the contents of this circular to the notice
of their constituents and customers concerned. The instructions contained in
this circular may also be brought to the attention of the card issuing companies
who may also be advised to remain alert against permitting payments for such
unauthorized transactions.
- The directions contained in this circular have been issued under sections
10(4) and 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
are without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully,
(Rudra Narayan Kar)
Chief General Manager-In-Charge