Mumbai: The Reserve Bank Thursday warned foreign companies not to use direct investments to set up entities in India so as to facilitate trading in currencies, securities and commodities without its approval.
Any incidence of such product facilitation would be treated as a contravention of the foreign exchange regulations and attract action under the FEMA, 1999, RBI said.
The central bank said it has been observed that eligible Indian parties are using overseas direct investments (ODI) automatic route to set up certain structures facilitating trading in currencies, securities and commodities.
"It is clarified that any overseas entity having equity participation directly/indirectly shall not offer such products without the specific approval of the RBI given that currently Indian Rupee is not fully convertible and such products could have implications for the exchange rate management of the country," it said in a notification.
"It has come to the notice of RBI that such structures having equity participation of Indian parties have also started offering financial products linked to Indian rupee (non-deliverable trades involving foreign currency, rupee exchange rates, stock indices linked to Indian market, etc)," it added.
First Published: Thursday, April 25, 2013, 21:35