What changed
RBI observed that some banking customers are still using credit cards or electronic channels to remit funds to overseas forex trading portals and receiving cash refunds. To strengthen restrictions, RBI now mandates that banks must immediately close the credit card or account of any customer found undertaking such prohibited transactions and report it to RBI in a prescribed format.
What it means for you
Banks must proactively monitor and act against customers using credit cards or online banking for unauthorized forex trading. Non-compliance by banks can lead to RBI action under FEMA Section 11(3). This tightens the noose on retail forex speculation and reinforces KYC/AML compliance.
What you must do
- Advise all customers that overseas forex trading through electronic/internet portals is a FEMA violation and may invite legal action.
- Immediately close the credit card or account of any customer found undertaking such prohibited transactions.
- Report such closures to RBI's Forex Markets Division in the format provided in the circular's annex.
- Ensure card issuing companies are alerted to block payments for such unauthorized transactions.
Who it affects
AD Category-I banks offering credit cards or online banking, Card issuing companies, Customers using credit cards or bank accounts for online forex trading
What happens if a bank fails to comply with these directions?
RBI may proceed against the defaulting bank under Section 11(3) of FEMA, 1999 and take any action deemed necessary.
Are customers liable for using credit cards for forex trading on overseas portals?
Yes, any resident Indian collecting or remitting payments for overseas forex trading through electronic/internet portals is liable for contravention of FEMA and violation of KYC/AML norms.