Banks to close a/cs using cards for online forex trade: RBI

The objective is to strengthen the restrictions on some online activities which are in violation of FEMA

September 18, 2013 11:20 IST | India Infoline News Service
The Reserve Bank of India (RBI) asked banks to close accounts of customers using credit or debit card for online forex trading transactions, which are prohibited.

Banks who offer credit cards or online banking facilities to their customers should advise their customers that any person resident in India collecting and remitting payments outside India in any form towards overseas foreign exchange trading through electronic/internet trading portals would make himself liable to be proceeded against with for contravention of the Foreign Exchange Management Act (FEMA), 1999 besides being liable for violation of regulations relating to Know Your Customer (KYC) norms / Anti Money Laundering (AML) standards.

As and when any bank comes across any prohibited transaction undertaken by its credit card or online banking customer, the bank will immediately close the card or account of the defaulting customer, the RBI said in a notification on Tuesday.
If it is observed that the bank concerned has failed to carry out the measures as outlined above, RBI may proceed against the defaulting bank, it said.

The RBI has observed that some banking customers undertake online trading in foreign exchange on websites offering such schemes wherein they initially remit funds from Indian bank accounts using credit cards or other electronic channels to overseas websites and subsequently receive cash refunds from the same overseas entities into their credit card or bank accounts.

The objective is to strengthen the restrictions on some online activities which are in violation of FEMA, 1999.

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