The Reserve Bank of India (RBI) on Wednesday has advised Banks authorised to deal in foreign exchange to be more vigilant and exercise greater caution to prevent the misuse of banking channels in facilitating unauthorised forex trading.
As and when AD Cat-I (Authorised Dealer Category – 1) banks come across an account being used to facilitate unauthorised forex trading, they should report the same to the Directorate of Enforcement (ED), Government of India, for further action, as deemed fit, RBI said in a circular.
This advisory comes as the central bank has come across instances of unauthorised entities offering foreign exchange (forex) trading facilities to Indian residents with promises of disproportionate/exorbitant returns.
RBI’s investigation revealed that to facilitate unauthorised forex trading, these entities have taken recourse to engaging local agents who open accounts at different bank branches for collecting money towards margin, investment, charges, etc.
“These accounts are opened in the name of individuals, proprietary concerns, trading firms etc. and the transactions in such accounts are not found to be commensurate with the stated purpose for opening the account in several cases.
“It is also observed that these entities are providing options to residents to remit/deposit funds in rupees for undertaking unauthorised forex transactions using domestic payment systems like online transfers, payment gateways, etc,” per the circular.
RBI said AD Cat-I banks may advise their customers to deal in forex only with ‘authorised persons’ and on ‘authorised electronic trading platforms (ETPs)’.