Canara to invest Rs 2.82 crore in commodity exchanges

Canara Bank is investing Rs 2.40 crore in the National Commodity & Derivatives Exchange Ltd (NCDEX) and Rs 42 lakh in the Multi-Commodity Exchange (MCX) as equity capital.

The move is part of the bank's strategy to involve itself in the emerging commodity markets in the country.

The investment proposals have been submitted for the Reserve Bank of India's approval.

According to a statement from the bank, it also plans to become an institutional trading-cum-clearing member or a professional clearing member in MCX.

There is also a proposal to offer the electronic funds transfer facility as a part of the clearing function to the commodities exchanges.

Canara Bank also expects the association (with major commodity exchanges) to help bring its products nearer to the farming community through its network of more than 1,600 rural and semi-urban branches.

The statement further added that commodity trading has excellent opportunities in India as the physical commodity market size including agricultural commodities is estimated to be around Rs 11 lakh crore per annum.

Of this, agricultural products, precious metals and base metals account for Rs 6 lakh crore and energy products contribute the rest.

The investment in commodity exchanges will help strengthen their capital base besides intensifying their functioning.

It will also give the bank a better option to advance against agricultural commodities stored in warehouses and thus help improve liquidity of the farming community.