BSE in pact for India's first bullion exchange

BSE to hold 30% stake in return for technology and platform, IBJA and individual jewellers the rest

India Bullion and Jewellers Association (Ibja) has signed an agreement with the BSE for setting up a bullion exchange, the first of its kind in India.

A Special Purpose Vehicle is to be formed, wherein Ibja and its constituents will hold 70 per cent and BSE the rest. Both entities have approached the Union ministry of finance for approval. “We are hopeful (of getting this) very soon,” said Mohit Kamboj, president of Ibja. The idea of setting up a spot bullion exchange was floated last month by Union economic affairs secretary Shaktikanta Das.

BSE will provide the trading technology, platform and technical knowhow. Ibja is to bring in the infrastructure, trading expertise and other necessary funds. The proposed exchange is expected to see trading from the April quarter of 2016.

The exchange will primarily trade in gold. Once this stabilises, trading in silver will be launched. It would primarily offer three settlements a day for both buyers and sellers. “It will work like a retail shop. You can buy gold of even small denominations on a real-time delivery basis. Other types of trading will be available for large quantities, for which delivery will be on T+1 and T+2 bases,” said Ketan Shroff, Director, Ibja.

The exchange plans to encourage banks to start delivering gold in large volumes, to enable jewellers to buy on this platform. Ibja says it would later encourage banks to become equity partners in the exchange. It proposes to appoint third parties as custodians of the bullion for delivery on the exchange.

Kamboj stated that if all trades — of bankers, bullion merchants and jewellers -- for buying and selling of bullion are routed through this platform, complete transparency can be had by the government in this trade. The exchange can generate a data base for the government which would be very helpful to detect bogus and malefic transactions.

India imports about 1,000 tonnes of gold a year, equivalent to Rs 250,000 crore. However, most transactions for utilisation and consumption of the imported gold are not officially recorded. This would be the first spot exchange platform wherein all banks, bullion merchants, jewellers, exporters, refiners, wholesalers, retailers, nominated agencies, gold mutual funds and so on can transact, apart from end-consumers. It would also mean the entire mechanism of doing business in the segment would shift to the digital arena.