IFSCA seeks vast changes to develop commodity trading hub at GIFT-IFSC

IFSCA has proposed regulatory changes to notify commodity trading as a financial product and deepen participation at GIFT-IFSC to position it as a global commodities hub

As India looks to reclaim ground in commodity trading, the International Financial Services Centres Authority (IFSCA) has sought a series of regulatory changes from the government to deepen commodity trading and participation at GIFT-IFSC.

 

The proposals, drawn from an earlier report submitted by an expert committee, are aimed at positioning the Gujarat-based financial hub as a global centre for commodity trading. A central recommendation is to notify commodity trading as a “financial product” under the IFSCA Act, alongside classifying warehousing and commodity broking as “financial services”.

 

According to the Authority, this change would bring commodity markets within a unified regulatory framework. “Its central recommendation — to notify commodities and commodity derivatives as financial products under the IFSCA Act — would enable a unified, single-regulator framework covering exchange-traded, over-the-counter (OTC), and structured commodity products. This reduces regulatory fragmentation and improves capital efficiency compared to other IFSCs,” said Sanjay Kaul, managing director (MD) and group chief executive officer (CEO) of GIFT City.

 

The committee has also suggested amending regulations to empower IFSCA to notify the list of commodities on which derivatives can be issued, thereby expanding the universe of permissible contracts. Currently, the list comprises 104 commodities, which, the committee noted, carry ambiguity around the permissibility of issuing derivatives.

 

Another key proposal is to adopt a broader definition of commodities by moving to a “negative list” approach — allowing all commodities for trading unless explicitly prohibited.

 

“The committee also proposed development of internationally benchmarked, cash-settled and deliverable commodity derivatives, allowing GIFT-IFSC to evolve into a price-discovery and hedging hub for commodities where India has natural economic linkages. Further, enabling OTC commodity derivatives, commodity-linked notes, indices, and funds with central clearing and netting would attract global banks, trading houses, and asset managers,” Kaul added.

 

Industry experts, however, pointed out that implementing these recommendations would require approvals from multiple ministries and extensive inter-departmental consultations. Units operating in IFSCs are treated as foreign entities under Fema (Foreign Exchange Management Act), but remain subject to the Foreign Trade (Development & Regulation) Act, 1992, and the Foreign Trade Policy administered by the Directorate General of Foreign Trade.

 

The report also recommended taxation incentives and allowing IFSC banks to undertake commodity trading as priority areas. It noted a steady migration of major Indian commodity traders to hubs such as Dubai, Singapore, and Hong Kong, citing easier access to credit, seamless banking, and more favourable regulatory regimes.