CHENNAI (TIP): With the Reserve Bank of India (RBI) recently banning the use of remittance funds in any form towards overseas foreign exchange trading, banks have swung into action.

The ban also includes trading over electronic/internet portals or by use of credit/debit cards. A recent mailer by HDFC Bank to its customers stated that “the bank would be constrained to take necessary action by closing credit/debit cards in case of any overseas forex trading transactions observed on your card account and report the same to the regulator.”

“On our part, we have resorted to disabling functionalities on such world wide web platforms that are used for such currency trading,” Praveen Kutty, head, retail and SME banking, DCB Bank said. Bankers said the move was due to a security clampdown to prevent money laundering among others.

“Sometimes, using of international credit card or debit card may also result in trading in certain futures contract which maybe currently outside the regulator’s purview,” said a banker who did not want to be identified. In its notification the RBI had said that it has been observed that some “banking customers continue to undertake online trading in foreign exchange on portals or websites offering such schemes wherein they initially remit funds from Indian bank accounts using credit cards or other electronic channels to overseas websites or entities and subsequently receive cash refunds from the same overseas entities into their credit card or bank accounts.”

This is in violation of the Foreign Exchange Management Act (FEMA), 1999. The circular further added that any person indulging in such activities would make themselves liable to be proceeded against with for contravention of FEMA, besides being liable for violation of regulations relating to know your customer (KYC) norms or anti money laundering (AML) standards. “Kotak Mahindra Bank is fully compliant with RBI rules and regulations including this and the same has been communicated to our credit and debit card customers,” a spokesperson of the bank said.

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