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Government to launch India’s first international gold exchange

Government to launch India’s first international gold exchange

In an effort to increase market transparency, India, the second-largest consumer of precious metals worldwide, opened its first global bullion exchange on Friday. The India International Bullion Exchange (IIBX), situated in the western Gujarat state’s Gujarat International Finance Tec-City (GIFT City), may help standardise gold prices in India and facilitate trading for small bullion dealers and jewellers.

Nirmala Sitharaman, India’s finance minister, remarked that with the opening of this bullion market, “We will have stronger pricing negotiating strength.” Along with accelerating the financialization of gold in India, the exchange is expected to provide effective price discovery with the assurance of ethical sourcing and quality. India has strict regulations governing the import and sale of gold, and at the moment, only nominated institutions and organisations that have received the central bank’s approval are permitted to do so.

By giving certified jewellers direct access to import gold through the exchange mechanism, IIBX, with its technology-driven solutions, would help the movement of the Indian bullion market towards a more organised structure, according to a statement from the exchange. Such a market is managed by China, the world’s largest consumer of gold, and it is where all gold produced domestically and imported must be purchased and sold.

In 2021, India imported 1,069 tonnes of gold, up from 430 tonnes the previous year. In India, gold futures contracts are offered by the Multi Commodity Market (MCX) and National Commodity and Derivatives Exchange (NCDEX), however there is no physical exchange where gold can be purchased. “A transparent bullion trading system in GIFT City would also provide significant help to India’s attempts to monetise gold,” said Somasundaram PR, regional chief executive officer of WGC’s Indian operations. A total of 25,000 tonnes of gold are said to be owned by Indian households, and they are passed down from one generation to the next. To cut down on imports, New Delhi has been aiming to monetize these holdings.

What is bullion?

The physical gold and silver of high purity often kept in the form of bars, ingots and coins are referred to as bullion. Bullion is frequently kept as reserves by central banks or by institutional investors, and it is occasionally regarded as legal money.

Why This Exchange?

The exchange is noteworthy because it allows eligible qualified jewellers in India to directly import gold through IIBX for the first time since the deregulation of gold imports through nominated banks and agencies in the 1990s. Jewellers will need to become a trading partner or a customer of a current trading member to do so. Furthermore, the exchange has established the required infrastructure to keep actual gold and silver.

” This was set up to make it possible to trade commodities on an exchange. Trading may be done in US dollars as well because this is an international exchange. One of Asia’s major trading centres is where we place ourselves. International players would be delighted to use our vaulting services because of the low cost on IIBX. The fact that this is a free trade zone also means that no duties would be paid, “According to IIBX’s CEO and MD, Ashok Gautam.

How has it happened so far?

So far, certain banks and organisations chosen by the RBI import gold into various cities on a consignment basis and subsequently provide it to dealers and jewellers. For processing, storage, and other services, the banks and other organisations charge the gold exporters a fee. When dealing with domestic customers, they also raise the price of the gold.

Until it reaches the final user, the buyers transfer this fee through the value chain. With the IIBX now operating, eligible domestic customers can acquire the bars and coins from a foreign supplier there who is also a member of the IIBX through a branch in the gift city.

Who came on board?

64 significant jewellery retailers have joined the programme thus far, and more are applying. Among the prominent names is Malabar Gold Pvt. Ltd. Corporation Titan Ltd. Bengaluru Refinery Pvt Ltd Jewellery brand RBZ Pvt Ltd. The Zaveri and Company Pvt Ltd.

New RBI guidelines for Importing Gold:

In accordance with the current international trade policy and rules published under the IFSC Act, banks may now let certified jewellers make advance payments for the import of gold through IIBX for a period of 11 days. The RBI specifies that all payments by authorised jewellers for gold imports through IIBX must be made through an exchange mechanism that has been approved by IFSCA.

“All bullion imports for domestic use must go via the international Bullion Exchange, which will serve as the “Gateway for bullion imports into India.” The exchange ecosystem is anticipated to unite all market players to a single, transparent platform for trading bullion, guarantee the quality of the gold, promote deeper interaction with other financial market segments, and support India’s position as the main trading centre in the world.” read a government statement.

According to a statement by the IFSC Authority, this exchange would enable effective price discovery with the guarantee of ethical sourcing and quality, in addition to advancing the financialization of gold in India.

Who may sign up for the exchange?

  • Foreign Bullion Suppliers who adhere to OECD regulations
  • Non-Resident Individual/Proprietorship Firm
  • Registered Partnership Firm
  • Qualified Jewellers
  • Branches of IBU in GIFT City
  • Private Ltd Company
  • Public Ltd Company

Entities must have a minimum net worth of Rs 25 crore and 90 percent of their average annual turnover in the previous three fiscal years derive from sales of commodities classified as precious metals in order to qualify as jewellers.

After joining with the International Financial Services Center Association, NRI and Institutes will also be entitled to take part in the exchange (IFSCA) Only trading members or clients of trading members will be able to conduct transactions on IIBX on behalf of jewellers. A qualified jeweller who wishes to engage in trading must open a branch or subsidiary in an IFSC (International Financial Services Center) and submit an application to the IFSCA.

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