Banks Urged To Heighten Vigilance Against Unauthorised FX Platforms

On Monday, RBI Governor Shaktikanta Das expressed concerns regarding the proliferation of unauthorised forex trading platforms and urged banks to remain vigilant against such illegal activities.

Addressing the FIMMDA-PDAI annual conference in Barcelona, Das emphasised the need for heightened vigilance by banks, as certain individuals or entities continue to exploit banking channels for funding unauthorised FX trading platforms.

The RBI had previously introduced a framework in 2018 for the authorisation of electronic trading platforms (ETPs) for financial market instruments it regulates. These platforms facilitate transactions in various instruments, including securities, money market instruments, foreign exchange instruments and derivatives.

However, despite regulatory efforts, the RBI noted misleading advertisements of unauthorised ETPs offering forex trading facilities to Indian residents, often through social media, search engines, OTT platforms and gaming apps.

Reports indicated that such platforms engaged agents to lure unsuspecting individuals with promises of high returns, leading to financial losses for many residents. Consequently, the RBI cautioned the public against engaging in forex transactions on unauthorised platforms and updated an alert list of illegal forex trading platforms.

Recently, the RBI added 19 entities/platforms/websites to the alert list, bringing the total to 75 unauthorised forex trading platforms. Governor Das also highlighted the need for transparency in pricing in the forex market, emphasising that small customers deserve deals comparable to those offered to larger customers.

Furthermore, Das stressed the importance of enhancing and broadening the participation of Indian players in rupee derivatives markets, both domestically and offshore, while ensuring prudence.

He noted that liquidity in OTC derivatives markets, particularly in interest rate derivatives, remains limited to a few products, hindering efficient hedging for the broader economy. Additionally, Das mentioned the slow uptake of credit derivatives, essential for lower-rated corporate bonds, although the first credit default swap transaction occurred recently.

In conclusion, Das urged domestic market participants to fully embrace the new regulatory framework and seize the opportunities it presents. He also called on banks to implement appropriate safeguards to address challenges posed by new products, participants and markets.