The State Bank of India, the country’s largest scheduled commercial bank, has warned its credit card holders to refrain from certain transactions that are strictly prohibited by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act, 1999 (FEMA) and other applicable regulations.
As per the regulations, the RBI has asked banks to exercise due caution and be extra vigilant in respect to the use of credit card for the following:
- Forex Trading
- Purchase of Lottery Tickets
- Call Back Services
- Betting, Sweepstakes and Gambling Transactions
- Banned Magazines
Asking its cardholders to remain cautious, the SBI in its email communication said, “There are many forex trading merchants, casinos, hotels and websites that prominently advertise the above and ask you to pay through your credit card for these services.”
The RBI had asked banks to remain extra cautious after observing that some banking customers continue to undertake online trading in foreign exchange on portals / websites offering such schemes wherein they initially remit funds from Indian bank accounts using credit cards or other electronic channels to overseas websites / entities and subsequently receive cash refunds from the same overseas entities into their credit card or bank accounts.
As the margin payments being made by the public for online forex trading transactions through credit cards / deposits in various accounts maintained with banks in India, the central bank also advised banks to exercise due caution in respect of the accounts being opened in the name of individuals or proprietary concerns at different bank branches for collecting the margin money, investment money, etc in connection with such transactions.
The banking sector regulator has asked banks to advise their customers that any person resident in India collecting and effecting / remitting payments directly /indirectly outside India in any form towards overseas foreign exchange trading through electronic/internet trading portals would make himself/ herself / themselves 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.
Warning its customers, the SBI further said, “In the event of non-compliance with this guideline, the cardholder (including the add-on card holder) will be held liable and the cardholder may be debarred from holding the card.”