The IIBX would transform the gold market India

Bullion Exchange to solidify India’s image as a gold trading hub: GJEPC 

4th IGJS will be held in December 2021 

The Gem & Jewellery Export Promotion Council (GJEPC) has been spearheading structural policy reforms surrounding the organisation of India’s gold industry at the three previous editions of its annual India Gold & Jewellery Summit (IGJS) - the 4th edition of IGJS will be held in December 2021 in New Delhi. 

The GJEPC has been propagating the benefits of setting up a Bullion Exchange that can focus on price discovery and provide an entire ecosystem around financial products based on gold and physical deliveries. 

The scattered Indian gold market has numerous regulators overseeing different aspects of the trade. As a result, in spite of its significant size and important global position, the Indian gold market is unable to realise its full potential due to multiple challenges, including lack of quality assurance, weak price transparency, fragmented liquidity, and regulatory issues.  

The setting up of the India International Bullion Exchange (IIBX) by International Financial Services Centres Authority (IFSCA) will go a long way towards resolving these challenges and would transform the gold trading market in India. 

Colin Shah, Chairman, GJEPC, said, “GJEPC has been contributing to the policy changes in gold, and has been deliberating ways to formulate better standards through its annual India Gold & Jewellery Summit. We welcome the formation of the IIBX which will ultimately lead to development of the India Good Delivery Price.

This is expected to strengthen India’s position as an influential trading hub, provide an efficient price-discovery mechanism, establish a common transparent platform for bullion trading, address issues about quality assurance, and facilitate gold’s integration with other financial market segments. 

Moreover, this will provide impetus for Gold Monetisation scheme and this will be a platform for gold lending and the trading of gold, similar to Gold (Metal) Loans.” 

Stakeholders from across the gold ecosystem, including various concerned Government Departments and Ministries, and the Gem & Jewellery Export Promotion Council (GJEPC) discussed the IFSCA’s proposals on the IIBX at a recent meeting chaired by Commerce Secretary B.V.R. Subrahmanyam in New Delhi on 21st October.

 Some of the proposals that received                                                                    A favourable response at the meeting were: 

1: Mandating a certain percent of import of bullion by nominated banks /agencies through IIBX thereby adding an extra layer to the already canalised system for imports of bullion. 2: Import of bullion by qualified domestic jewellers through IIBX could be favourably considered and approved if they have a net worth of Rs.25 crore. This would be in addition to the canalised system in place. 

3: Enhancing the regulatory remit of IFSCA to Free Trade Warehousing Zones (FTWZs) in various SEZs with respect to vaulting infrastructure. 4: The matter regarding the integration of IIBX systems with SEZ Online, Department of Commerce has already taken up with NSDL and Directorate General of Export Promotion (DGEP). 

5: Encouraging exporters to use IIBX as a reference price for export of jewellery in the long term. 6: Enabling refiners (domestic/GIFT IFSC) of doré to deliver refined bars into IIBX. According to IFSCA, all the bullion imports for domestic consumption would be channelised through the exchange, making IIBX the “Gateway for Bullion Imports into India”. 

Somasundaram PR, Regional CEO, India, World Gold Council said, “IIBX at the International Finance Service Centre at GIFT City will herald a wave of reforms that should give India an active role in the global gold markets. IIBX will present the unique opportunities India offers to the global ecosystem to support the increasing role of gold in the mainstream financial system” 

In the report, the NITI Aayog Committee had proposed setting up of Bullion Exchanges that would provide an efficient and trusted ecosystem for trading gold and ensure the success of financialisation of gold, with an aim to improve market transparency, protect the interests of market participants and facilitate India to emerge as a price setter for gold.  

Following the announcement by the Finance Minister in Union Budget 2020-21, the International Financial Services Centres Authority (Bullion Exchange) Regulations, 2020 were notified on 11th December, 2020 which inter alia cover the Bullion Exchange, Clearing Corporation, Depository and Vaults. 

The Government has also taken steps to notify bullion spot trading and bullion depository receipts with underlying bullion as financial products and bullion related services as financial services. 

In May 2021, the Securities and Exchange Board of India (SEBI) approved the framework for a domestic spot exchange in India that together with IIBX, could empower bullion banking and may help with the successful implementation of the gold monetisation scheme and the development of gold-backed products, according to the World Gold Council. 

IFSCA had previously informed that pursuant to Memorandum of Understanding between National Stock Exchange of India Limited (NSE), the Multi Commodity Exchange of India Limited (MCX), India INX International Exchange (IFSC) Limited (INDIA INX), National Securities Depository Limited (NSDL), Central Depository Services (India) Limited (CDSL), the holding company India International Bullion Holding IFSC Ltd. (IIBH) has been created for setting up and operationalising International Bullion Exchange, Bullion Clearing Corporation and Bullion Depository in IFSC, GIFT City.