India’s First Bullion Exchange

In Context

• The Prime Minister recently launched India’s first international bullion exchange – India International Bullion Exchange (IIBX)– in Gujarat.

About

• The bullion exchange was launched at the International Financial Services Centre (IFSC) at Gujarat International Finance Tec-City (GIFT City) in Gandhinagar.
• Bullion refers to physical gold and silver of high purity often kept in the form of bars, ingots, or coins. It can be considered legal tender and is often held as reserves by central banks or held by institutional investors.

What is IIBX?

• The National Stock Exchange, Multi Commodity Exchange, India INX International Exchange, National Securities Depository and Central Depository Services Ltd have joined hands to establish the holding company India International Bullion Holding IFSC, which will operate the International Bullion Exchange.
• The IIBX was announced in the 2020 Union Budget, has enrolled jewellers to trade on the exchange and set up the infrastructure to store physical gold and silver.
• It is India’s first international bullion exchange. It offers a diversified portfolio of products and technology services at a cost far more competitive than the Indian exchanges as well as other global exchanges in Singapore, Dubai, Hongkong, New York and London.
• As the second biggest consumer of gold globally, setting up of the IIBX is seen as India’s effort to bring transparency to the market for the precious metal. 
• International Financial Services Centers Authority (IFSCA) is the regulator of IIBX. 

Advantages

• The IIBX will be a gateway for bullion imports into India, where all bullion imports for domestic consumption shall be channelised through the exchange.
• In addition to providing a trading avenue to various participants, a bullion exchange will also offer the advantages of price discovery, transparency in disclosures, guaranteed centralised clearing and assurance of quality.
• A bullion exchange, apart from providing standardisation and transparent mechanism, will also be an important step towards financialisation of bullion-based products, as per the report.
• The IFSCA has ensured sourcing integrity of the bullion delivered through IIBX by mandating compliance to Organisation for Economic Cooperation and Development (OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.
• Gold is tightly regulated in India and currently only nominated agencies and banks approved by the Reserve Bank of India can import gold and sell it to dealers and jewellers across the country.

Source: HT