The Bureau of Indian standard (BIS) on Wednesday notified standards for delivery of 32 items, including gold and silver. This implies that all commodities on the list, including bullion, will be treated on a par for delivery in India.
Indian standards for gold and silver have been made applicable from 28 December 2019. The standards for the two precious metals are the most debated, as India depends heavily on imports to meet its gold demand, and to a large extent silver demand, too.
Earlier, the Indian stock exchanges where gold and silver derivatives are traded — MCX, for example — accepted gold that met the London Bullion Market Association standards. Only imported gold met that standard. About 280 tonnes of gold processed by over 30 Indian gold refineries annually (refined from imported dore or unrefined gold) was not considered good delivery when sold on stock exchanges. However, with Indian standards for gold and silver defined, these will also become good delivery.
Now, these standards will need to be approved by the capital market regulator. But that is seen as only a formality.
James Jose, secretary of the Association of Gold Refineries and Mints, said: "India good delivery standards have now been announced. Now we need an autonomous regulator to ensure proper implementation. The regulator must have enough powers to get these implemented."
In the past couple of years, India's annual gold imports have been 700-750 tonnes. About 280 tonnes, or 40 per cent, of that was unrefined dore gold which could not be delivered on bourses like MCX. When cinders sell old jewellery that also comes for refining, that market is 200 tonnes per annum.
If a jeweller is buying back this gold from refineries, he may accept the bullion that is not meeting Indian standards. However, for all these, regulations by a prospective regulator will be crucial.
A few years ago, industry participants prepared details on regulations and who should regulate refineries. The Centre will now have to take a call on this.