International bullion exchange at IFSC likely to become operational by July-August

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KOLKATA: The international bullion exchange at the International Financial Services Centre (IFSC) in Gujarat’s GIFT City will likely become operational by July-August this year, paving the way for a large chunk of gold trading shifting from Dubai to India, the largest consumer of the metal in the world.

“Also, with the setting up of the international bullion exchange, a portion of the idle gold that is lying in the Indian households may come to the market as the sellers will be able to get a fair and transparent price for the precious metal,” GIFT City managing director Tapan Ray told ET.

It is estimated that around 22,000 tonnes of idle gold are lying in Indian households.

Ray said only one bullion exchange will come up at the IFSC. “The BSE, NSE and the Multi Commodity Exchange of India, along with an international partner, will set up the bullion exchange. They are now negotiating among themselves on the modalities of setting up the exchange,” he said. “The regulatory authority at the IFSC has laid down the guidelines for the bullion exchange. Anybody who wants to set up the exchange will have to have a net worth of $30 million on a continuous basis.”

The GIFT City MD added that despite being the largest consumer of gold, India does not have a say in international pricing of gold. “We have not been able to leverage the buying power in the world market,” he said.

India annually consumes 800-900 tonnes of gold.

The government had announced the bullion exchange in the last Union Budget.

“There will be bullion clearing operations too at the IFSC. Banks who are engaged in bullion importing will also have a presence at the international bullion exchange,” Ray said.

“This will lead to better price discovery of gold, create more jobs and further enhance India’s position in the bullion market. The gold that will be traded at the bullion exchange will have to be of international standard. There will be an entire value chain comprising surveillance, depository receipts and consumer education,” he added.

The international bullion exchange is also expected to lead to a uniform pricing of gold across the country. Today, prices vary from state to state and consumers have to buy gold at the rate they are being offered.

Bullion vaulting services have already commenced in the GIFT City. Sequel Logistics has opened a precious commodities vault at the GIFT City’s multi-services special economic zone.

The establishment of a regulated international bullion exchange is a step towards making gold a mainstream asset class. An organised bullion trading system will benefit the entire supply chain, particularly, small players and exporters.

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