What awaits the Indian gold exchange

India is hoping to become a gold-price country with the International Indian Gold Exchange (IIBX), now open at Gujarat International Finance Tech City (GIFT) – International Financial Services Centre. Mint explains the challenges and opportunities ahead of IIBX.

What will the new bullion exchange do?

All bullion imported into India for domestic use will be routed through IIBX. Eligible jewelers with a net worth of 25 crore and earn 95% of their revenue from jewelry and NRIs with a net worth of $500,000 tradable at IIBX, as long as they wish to deliver the actual gold. The expectation is that all small gold dealers and jewelers will join this transparent platform, which will provide efficient price discovery and quality assurance, while allowing for more integration. with other segments of the financial market. The larger, lofty-sounding goal is to establish India as the dominant gold nation in the world.

What is needed to set up IIBX?

Currently, Indian traders and jewelers need to use the services of authorized banks of the Reserve Bank of India and designated bodies to import gold. But not all jewelers can access these channels, which affects the quality of the gold. India’s gem and jewelry industry is about 7 trillion, and 90-95% of that is made up of micro, small and medium enterprises. According to the White Paper of the Securities and Exchange Commission of India, although second only to China in terms of gold consumption, India does not play a significant role in influencing its price, relying instead on London Gold and Silver Market Association (LBMA).

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What was the origin of the gold exchange idea?

In January 2017, Prime Minister Narendra signaled the need to make India a stock and commodity price country of which India is a major player. In May 2018, a report by Niti Aayog promoted the concept of bartering gold at GIFT IFSC. The exchange was announced in the 2020-21 Union budget, rules announced in December 2020 and a pilot rollout in August 2021.

How will the bullion exchange work?

Indian and global vault service providers have established or are setting up facilities at GIFT-IFSC. Imported gold will be placed in these vaults, to generate electronic gold receipts. These revenues will be listed and traded on the exchange; Market participants can receive physical gold based on these receipts. Trades are exempt from local taxes, unless goods are shipped outside the GIFT City. Since its launch, only 20 kg of gold has been traded on August 2, with a turnover of $1.1 million.

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