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Is forex trading legal in India? All you need to know as a trader

The foreign currency (forex) market is the largest financial marketplace in the world with a daily turnover of over $6 trillion. This is where governments, large financial institutions, companies and other entities buy and sell currencies. In India, forex trading is legal but comes with a set of limitations. Let us show you how forex trading in India works. 

Forex trading is the practice of selling one currency and buying another one. Therefore in forex trading, we always talk about trading a currency pair. For instance, the value of the USD/EUR pair is quoted as 1 US dollar per euro. If the currency pair is trading at 1.1 it means you will have to pay 1.1 euro to buy 1 US dollar.

Forex trading in India
The essence

  • The forex market is the largest financial market in the world
  • Forex trading is legal in India
  • Indian authorities have strict rules and limitations on forex trading
  • Indian residents engaging in illegal forex trades will be liable to penal action 
  • Indian investors can trade forex by opening an account at a registered broker
  • There is a limited number of currency pairs that are permitted in India
  • Currency derivative products (i.e. futures, forwards, options)  are also legal in India

Forex trading in India
Forex trading limitations in India

The Foreign Exchange Management Act (FEMA), set forth by the Reserve Bank of India, is the legal framework for forex trading in India. FEMA states that trading in foreign currencies is allowed in India with certain restrictions.

Forex transactions can only be undertaken with authorized persons and for permitted purposes. According to the RBI, which is the country’s central bank, an authorized person is an entity authorized by the RBI itself  to deal in forex. It can be an authorized dealer, money changer, or off-shore banking unit. 

Permitted forex transactions executed electronically should be undertaken only on electronic trading platforms (ETPs) authorized for the purpose by the RBI or on recognized stock exchanges such as the National Stock Exchange of India (NSE), the BSE and the Metropolitan Stock Exchange of India (MSE). ETP means any electronic system, other than a recognised stock exchange, on which transactions in eligible instruments like securities, money market instruments, foreign exchange instruments, derivatives, etc. are contracted. 

Indian residents undertaking forex transactions with unauthorized persons or on unauthorized ETPs shall render themselves liable for penal action under FEMA.

Forex cash and spot transactions can be undertaken for the purpose of buying/selling foreign exchange for permitted current/capital account transactions. Some of the permitted purposes include payments due in connection with foreign trade, other current business, services, and short-term banking and credit facilities in the ordinary course of business; payments due as interest on loans and as net income from investments, remittances for living expenses of parents, spouse and children residing abroad; and expenses in connection with foreign travel, education and medical care of parents, spouse and children.

Forex derivatives

Currency derivatives (such as futures, forwards and options) are contracts in which a specified amount of a particular currency pair is traded on a pre-set date in the future. The RBI has a specific set of rules for trading forex derivatives.

Retail investors in India can trade the following forex derivatives:

  •  OTC derivatives
    - Foreign Exchange Forwards
    - Foreign Exchange Swap
    - Currency Swaps
    - Purchase of Call and Put Options
    - Purchase of Call and Put Spreads


  • Exchange traded derivatives
    - Foreign Exchange Futures
    - Foreign Exchange Options

 Indian residents are permitted to trade INR-based (Indian rupee) derivative products (i.e. USD/INR forwards or options) for the purpose of hedging exchange rate risk. The regulator has no restrictions for the purpose of trading non-INR based derivatives (i.e. EUR/USD forwards, futures, options). 

There are limits in terms of the currency pairs available to Indian investors. The base currency being traded upon or the quote currency has to be the Indian Rupee (INR). Indian investors can trade EUR, GBP, USD and JPY against the Indian Rupee. In addition to INR-based currency pairs, the following can also be traded in India:


The National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), and the Metropolitan Stock Exchange of India all offer forex trading. Currency futures are available for all of the above currency pairs, however, currency options are only available for USDINR, EURINR, GBPINR, and JPYINR.

Forex trading in India
How to trade forex in India?

The safest bet to avoid a scam is to open a trading account at one of the SEBI regulated or authorized forex brokers.
BrokerChooser’s team of experts compiles a list of best forex brokers in India every year after checking more than 500 criteria for each broker. We have more than 100 brokers reviewed on our site and our analysts examine over 40,000 data points altogether.

The best forex brokers in India in 2022 are:

  1. Saxo Bank
  2. Fusion Markets
  3. CMC Markets
  4. Interactive Brokers
  5. Axi

Not sure which broker to choose? Use our unique broker chooser tool to get a personalized list of brokers available to you.
Want more details? Check out our in-depth broker comparison table to see how a given forex broker compares to similar brokers.

Before you commit to a broker, make sure they are authorized to serve Indian residents. For this, you will need to identify if the forex broker in question is authorized by the Securities and Exchange Board of India (SEBI), which is the financial market regulator in India. As a first step, locate the broker’s registration number in the disclosure text at the bottom of the broker's homepage. Next, look up the FSP number on the financial register available on the SEBI's website to validate that the broker is currently authorized in India.

Forex trading in India
How to start currency trading in India

Once you have decided which broker you want to work with, you will need to open a currency trading account with them.

Steps of opening a currency trading account:

  1. Go to the broker’s website and click on Sign up/Open Account
  2. Enter the personal information required
  3. Complete the KYC (Know Your Customer) process
  4. Set up/receive login credentials
  5. Fund your trading account via one of the available deposit options. You will have to deposit a set amount into your account, this is called a margin requirement. The broker will inform you about the margin amount.
  6. Download the trading platform/app (as and if applicable)
  7. Start trading

The global currency market is huge and highly liquid, meaning that there is a high number of buyers and sellers at all times. If you're a beginner, be careful with forex trading as forex products are complex and risky, therefore not suitable for everyone. You can easily lose all your invested money. If you don't know how forex trading works, take a look at our forex education articles.

Forex trading in India

How to make money with forex trading in India?

The biggest hurdle when trading forex in India is the limited number of foreign currencies available to trade. Authorities in India only allow Indian residents to trade the INR against other currencies. Indian investors are also permitted to trade the following currency pairs. GBP/USD, EUR/USD, USD/JPY. Forex derivatives (i.e. futures and options) are legal in India. Having said that, the market is liquid enough for Indian investors to reap generous profits in currency trading if they apply the right strategy. 

Is forex trading legal in India?

Yes, forex trading is legal in India but it comes with several restrictions. Permitted transactions must feature the Indian rupee (INR) as either the base or the quote currency (i.e. INR/USD or USD/INR). Other permitted currency pairs are: GBP/USD, EUR/USD, USD/JPY.  Indian retail investors can only trade currencies if they open a trading account at one of the forex brokers registered with SEBI, the Indian financial market regulator. 

Can you trade forex at Zerodha?

Zerodha, one of the largest Indian brokerages, supports currency trades only in the form of futures. The lineup of available currency pairs at Zerodha is the following: EURINR, USDINR, JPYINR, GBPINR. Zerodha has super low currency futures fees. There is exceptionally transparent information on fees on the website of Zerodha, supplemented by an easy-to-use fee calculator.

Use our in-depth broker comparison table to see how Zerodha compares to similar brokers.


Author of this article

Edith Balázs

Author of this article

Edith is an experienced financial journalist having worked for 20+ years as a correspondent for Bloomberg, Dow Jones and The Wall Street Journal covering macroeconomics, stock, currency and fixed-income markets. She holds a Master's degree in American Studies and Journalism.

Edith Balázs

Senior Editor

Edith is an experienced financial journalist having worked for 20+ years as a correspondent for Bloomberg, Dow Jones and The Wall Street Journal covering macroeconomics, stock, currency and fixed-income markets. She holds a Master's degree in American Studies and Journalism.

Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology