What is Dabba Trading in India? Meaning, Risks, Legal Issues & Real Examples

Dabba trading is an illegal and unregulated form of stock market trading in India, where transactions take place outside the official stock exchanges like NSE or BSE. In this practice, brokers record trades in their personal books without executing them on any recognized platform, effectively bypassing regulatory oversight, taxes, and transaction costs. Dabba trading is essentially betting on stock price movements, with profits or losses settled in cash—often linked to black money and hawala networks. This form of trading is risky and offers no legal protection to investors. If a trader is defrauded, there’s no recourse through SEBI or the courts. It also violates multiple laws, including the Securities Contracts (Regulation) Act and the Income Tax Act, attracting heavy penalties and imprisonment. Several real-life crackdowns by SEBI and police in cities like Mumbai, Surat, and Rajkot have exposed the scale of this shadow market. Investors are advised to avoid such illegal practices.