The order from the Securities and Exchange Board of India (SEBI) was made after the regulator said that Barclays had not properly disclosed details of one of its derivative deals.
Barclays incorrectly reported that the sale of instruments in Reliance Communications had been issued to UBS AG, when in fact they had gone to Hythe Securities, SEBI claimed.
Hythe then sold the derivatives on to another fund, a deal Barclays is reported not to have disclosed.
SEBI stated that the suspension will remain in place until Barclays can prove it has adequate systems and controls to properly register transactions of its offshore derivatives.
"Since receiving SEBI's original email request on September 24th 2009, we have been and will continue to cooperate fully with SEBI as it examines certain offshore derivative transactions," the bank said in a statement this week.
Barclays is also currently defending itself in an ongoing lawsuit in America related to its purchase of Lehman Brothers.
It is claimed that the British bank made a secret deal with some Lehman Brothers executives to wipe off $5 billion from the cost of buying its brokerage's securities book, allowing it to make a quick profit on the business.
By Tony Aynsley