SEBI targets commodity market boost; eyes new rules, FPIs for liquidity
SEBI is shifting its focus to aggressively develop India's commodity market, aiming to boost liquidity and improve price discovery, particularly for gold and agricultural products. This move includes exploring participation from foreign portfolio investors and addressing GST-related hurdles. The initiative seeks to strengthen financial stability and provide better price benchmarks for crucial commodities, which can directly affect inflation and business costs.
The Securities and Exchange Board of India (SEBI) is making a significant push to invigorate India's commodity market, aiming to boost liquidity and refine how prices are discovered, especially for gold and agricultural products. This strategic shift reflects a broader goal to enhance financial stability and provide more reliable benchmarks for commodities that directly influence both inflation and business costs.
A key focus for SEBI is boosting the adoption of Electronic Gold Receipts (EGRs) to establish India as a global gold pricing hub. The regulator is actively addressing hurdles, particularly those related to Goods and Services Tax (GST), which have limited EGR's reach. Integrating gold products like EGRs and commodity derivatives is seen as crucial for managing frequent price swings.
To increase participation, SEBI is considering allowing foreign portfolio investors (FPIs) to trade in non-cash-settled, non-agricultural commodity derivatives. This move is designed to inject more liquidity into the market. Discussions are also underway with the Reserve Bank of India (RBI) and the insurance regulator to encourage greater institutional involvement across the commodity market spectrum.
SEBI is also forming working groups to fine-tune the regulatory framework for both agricultural and non-agricultural commodities, examining critical areas such as margin requirements, position limits, and delivery mechanisms. The goal is to simplify compliance for market intermediaries and ensure robust market integrity. Furthermore, SEBI is exploring the merger of equity and commodity investor protection funds to create a more streamlined and well-resourced system.
By tackling these operational and taxation challenges, SEBI aims to create a more dynamic and transparent commodity market that can offer better price discovery and hedging opportunities. This development is expected to safeguard investors from unregulated "digital gold" products and provide a stronger foundation for India's growing economy.
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