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India’s first bullion exchange

  • Published
    28th Jul, 2022
Context

Prime Minister Narendra Modi will inaugurate India's first bullion exchange at Gujarat's GIFT City.

About

India’s first International Bullion Exchange (IIBX)

  • The bullion exchange was announced in the 2020 Union Budget.
  • IIBX is India’s first International Bullion Exchange set up at the GIFT City, Gandhinagar.
  • It has not only enrolled jewellers to trade on the exchange, but has also set up necessary infrastructure to store physical gold and silver.
  • IIBX offers a diversified portfolio of products and technology services at a cost which is far more competitive than the Indian exchanges as well as other global exchanges in Hong Kong Singapore, Dubai, London and New York. 
  • The International Bullion Exchange shall be the Gateway for Bullion Imports into India, wherein all the bullion imports for domestic consumption shall be channelized through the exchange
  • Regulator: International Financial Services Centres Authority (IFSCA) is the regulator of IIBX. 
  • IFSCA intends to nurture a bullion ecosystem aimed at positioning India in the international markets, initially as a price influencer and ultimately as a price setter

Who can trade on the IIBX?

  • Qualified jewellers will be permitted to import gold through the IIBX.
  • To become qualified jewellers, entities require a minimum net worth of Rs 25 crore and 90 per cent of the average annual turnover in the last three financial years through deals in goods categorised as precious metals.

Bullion:

  • Bullion refers to physical gold and silver of high purity that is often kept in the form of bars, ingots, or coins.
  • Bullion can sometimes be considered legal tender and is often held as reserves by central banks or held by institutional investors.
  • The Government had notified in August 2020 about the Bullion Spot Delivery Contract and Bullion Depository Receipt (BDR) with underlying Bullion as Financial Product and related services as Financial Services.

Storage facility:

  • A cumulative storage capacity for approximately 125 tonnes of gold and 1,000 tonnes of silver is planned at the GIFT City.
  • Currently, Indian and global vault service providers have set up, or are in the process of setting up, vaulting facilities at the GIFT-IFSC. 
  • The vaulting facilities at all the key bullion centres in India will act as the spokes to feed the bullion for the jewellery manufacturers and exporters across the country, while the IIBX at GIFT-IFSC will serve as a trading hub.

Advantages of having bullion exchange in India:

  • The IIBX will be a gateway for bullion imports into India, where all bullion imports for domestic consumption shall be channelised through the exchange.
  • A bullion exchange will also offer the advantages of price discovery, transparency in disclosures, guaranteed centralised clearing and assurance of quality.
  • A bullion exchange, apart from providing standardisation and transparent mechanism, will also be an important step towards financialization of bullion-based products.
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