It's not new, and not related to bitcoin. In FEMA rule you can't use your card directly to any exchange outside India for trading. You are lucky, they are just closing account, otherwise you did broke rules and Police can come to your home.
Do u mean sending money to fully compliant Japanese exchanges from India and receiving from them using SWIFT code is illegal?
Yes. Totally. Many banks have written it in fine print.
wow this is bad ... First Kotak now ICICI
This is old news, they keep saying this but never act on it. Part of the reason being the whole shabang is untraceable.
Tip : get a B2 account if its available in your city and stick to it. Back when I was trading actively I used my B2 account extensively. Will not go into the details of the entire turnover but it was a lot. And this was after RBI made their rules more stringent in (and after) 2008.
B2 is useless piece of crap. You can only transfer 25k INR through it.
Edit: it's not available anymore for new customers.