RBI acts tough on offshore FX trading on the internet

The RBI cracked down on offshore foreign exchange trading by Indians through online trading websites, asking banks to report any such remittances to the regulator.

In a circular issued late on Tuesday, the Reserve Bank of India (RBI) asked banks to advice customers not to undertake forex trading on foreign websites that offer currency contracts by accepting margins through credit card and online money transfer mechanisms.

The RBI also asked banks to close the credit card or online bank account of a customer that is found to

be in violation of the rule.

The rupee has been hard hit in this summer's rout of emerging currencies, losing around 20 percent of its value against the dollar at one point, and significantly increasing the burden of Indian companies' dollar debt.

The central bank has been trying to curb the offshore rupee market by asking banks to cut down on overnight positions as well as asking foreign institutional investors to produce documentation from clients in order to hedge their currency risk in the onshore forward markets.

The central bank has already reduced the limit for remittances made by residents to $75,000 from $200,000 per financial year.