Mumbai: The Reserve Bank has cautioned credit card issuing companies against illegal online forex trade by certain firms and has asked them to not permit payments for such transactions.

The regulations under Foreign Exchange Management Act (FEMA), 1999, do not permit resident Indians to trade in foreign exchange in domestic or overseas markets.

The RBI's warning comes in the wake of introduction of overseas foreign exchange trading on a number of Internet and electronic trading portals, luring the residents with offers of guaranteed high returns based on such forex trading.

"The advertisements by these Internet or online portals exhort people to trade in forex by way of paying the initial investment amount in Indian rupees," the RBI said.

Many companies even engage agents who personally contact gullible people to undertake forex trading and investment schemes and entice them with promises of disproportionate or
exorbitant returns, the RBI said.

Such companies ask public to make the margin payments for such online forex trading transactions through credit cards or deposits in various accounts maintained with banks in India, the RBI said.

"The card issuing companies who may also be advised to remain alert against permitting payments for such unauthorized transactions," the central bank said.

The apex bank said it has also noticed accounts being opened in the name of individuals or proprietary concerns at different bank branches for collection of the margin and investment money.

The banks have been asked to exercise "due caution and be extra vigilant" in respect of the such transactions, the RBI's circular said.

(Agencies)