Finance Minister Nirmala Sitharaman has increased the responsibility of the Securities and Exchange Board of India (SEBI) by appointing it as regulator for the Gold Spot Exchange. The recommendation to nominate SEBI in this role also came from the National Institute for Transforming India.
In the Union Budget of 2018-19, the government had announced its intent to establish a system of regulated gold exchanges in the country. For this purpose, SEBI will be notified as the regulator.
For warehousing purposes, the government has appointed Warehousing Development and Regulatory Authority (WDRA) as the regulator.
The government says WDRA will be strengthened to set up a commodity market ecosystem arrangement, including vaulting, assaying and logistics, in addition to warehousing for agriculture commodity contracts.
In the BJP-led NDA government's first tenure, the Forward Market Commission (FMC) was merged with SEBI in 2015. Now, this time government has appointed it as regulator of gold exchange.
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After a long deliberation with stakeholders, NITI Aayog had submitted a report in 2018 on the gold exchange. Surendra Mehta, National Secretary of the India Bullion & Jewellers Association (IBJA), told Moneycontrol: "The appointment of SEBI as a regulator for gold exchange will speed up the process of setting up of domestic gold exchange. These will bring more transparency in the bullion trade"
But the move is fraught with roadblocks. The International Financial Service Centre (IFSC) in Gift City, Gandhinagar, is also establishing a bullion exchange. Interestingly, the IFSC regulator is not in favour of a multiple bullion exchange. All the exchanges, including the International Exchange, a subsidiary of the Bombay Stock Exchange (BSE), the National Stock Exchange International (NSEI), and the Multi Commodity Exchange (MCX) are in discussions for setting up the exchange.
A source explained the predicament. "Now it for the SEBI to decide whether they will allow different exchanges or a single bullion exchange," he told Moneycontrol.
Another source told Moneycontrol that "SEBI was not in favour of regulating the spot exchange, as they have seen problems in regulating it at the National Spot Exchange Limited."
India is the largest importer of gold in the world. As per the World Gold Council report, import of gold decreased by 52 percent in calendar year 2020. In 2019, India imported 827 tonnes of gold while in 2020, the number had slipped to 394 tonnes.