Fans of Forex and financial markets residing in India are in for a disappointment, as the country’s financial authorities have issued a notification aimed at reprimanding traders who operate in these online markets.
Local banks across the country have been ordered by the central bank to close all credit cards and bank accounts of customers who have deposited money even once with a bank. foreign (offshore) forex broker .
The process was very simple, the RBI (Reserve Bank of India) sent a letter to each of the country’s banks as well as to the various bank card issuing entities, requesting that Indian nationals who practice trading be sanctioned. given that this activity is not legal on Indian soil.
According to the Reuters news agency, a specialist in financial information, the RBI has even directly asked its banking advisors to warn their clients regarding trading on the Forex market through foreign forex brokers, but also to monitor customers who could turn out to be potential traders, in other words those who use recurring money transfers through online money sending and receiving services such as Money bookers (Skrill), Neteller or Paypal which can be used to supply trading accounts with money.
We can then ask ourselves why such a ban on Forex in India?
Well it turns out that the value of the Indian rupee has continued to decrease since mid-2011, the price went from 44 INR (Indian rupees) per US dollar to 68 INR per US dollar in September 2013 (see USD/INR currency pair chart below).
The RBI thus blames increased speculation by foreign and local market participants; significant excess volatility was noted and, according to the central bank, contributed to the fall in value of the Indian rupee.
The Indian central bank cannot of course act against foreign traders but takes the necessary measures to prohibit trading by Indian individual (retail) traders but also by institutional traders (banks, hedge funds, companies and other firms).
Financial penalties also accompany this ban linked to speculation.
In addition to the accounts and bank cards of the violators which will be frozen, the latter will be imposed a first fine of 10,000 rupees for non-compliance with RBI rules (i.e. $162) and if the fraudster still continues to speculate on the markets after this first warning and this first fine it will be subject to pay an additional $162 per day of unauthorized trading.
These sanctions will certainly discourage average Indians, you should know that $162 represents a significant nest egg in India when we know that the average salary is less than $2 per day in this country, with $162 it is possible for a Indian resident to pay their rent, their water and electricity bills, their internet subscription, and much more.
On the other hand, regarding institutional investors such as hedge funds, we are not sure that this ban will slow them down from a speculation point of view; $162 represents only a grain of sand compared to the colossal sums injected into the markets every day by these large institutional investors.
There is reason to wonder about the effectiveness of the Indian central bank’s plan against traders, since this will in no way prevent international traders from speculating on the markets and more particularly on the rupee, at the same time. title that institutional traders for whom settling the payment of such a low fine will not be a problem.