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May 2011

A.P. (DIR Series) Circular No. 53, dated 7-4-2011 — Overseas forex trading through electronic/internet trading portals.

By Gaurang Gandhi Chartered Accountant
Reading Time 1 mins
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This Circular reiterates that remittances under the Liberalised Remittance Scheme are allowed only in respect of permissible capital or current account transactions or a combination of both. All other transactions, which are otherwise not permissible under FEMA, 1999, including the transactions in the nature of remittance for margins or margin calls to overseas exchanges/overseas counterparty, are not allowed under the Scheme.

This Circular advices banks to exercise due caution and be extra vigilant in respect of remittances under scheme so as to avoid payments towards margin money for online foreign exchange trading transactions as these derivative transactions can only be undertaken by persons resident in India based on the presence of an underlying price risk exposure.

Further, any person resident in India collecting and effecting/remitting such payments directly/indirectly outside India would make himself/herself liable to be proceeded against with for contravention of FEMA, 1999 besides being liable for violation of regulations relating to Know Your Customer (KYC) norms/Anti Money Laundering (AML) standards.

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