What are the prohibited transactions?
Avinash Kumar Khard, Partner at DSK Legal, says, “Schedule I of the FEMA Current Account Rules, provides a list of transactions that are prohibited. Further, these transactions cannot be undertaken using credit cards or debit cards.”
Khard says, “International credit cards and debit cards cannot be used for online or otherwise purchase of prohibited items like lottery tickets, banned or proscribed magazines, participation in sweepstakes, payment for call-back services etc., since no drawal of foreign exchange is permitted for such items/activities.”
As per a recent email sent by SBI Credit Card to its customers, using your credit card for forex trading, betting and gambling is also prohibited over and above the transactions mentioned above.
What is the penalty?
Usually, the credit/debit card issuing banks/non-banks advise their customers that such transactions via the cards are prohibited. If a customer uses his/her credit card for such prohibited transactions, then as per RBI regulations, the cardholder will be held liable and will be barred from holding the card, stated SBI Card in its email.
Khard says, “If an individual violates the FEMA Current Account Rules, then such individual shall be liable to a penalty under the FEMA. Such penalty amount may go up to thrice the sum involved in such contravention.”
In many foreign countries, forex trading merchants, casinos, hotels and websites prominently advertise the above-mentioned products and services. To avail these, the individual is often asked to pay using their card – debit or credit card. If you are travelling abroad and come across one of these advertisements and are enticed by it, then think twice before you use your credit/debit card.
Khard says, “FEMA Current Account Rules are applicable to international transactions only. Thus, individuals travelling abroad should avoid using his/her international credit card and debit card to avoid undertaking any prohibited transactions.”