The Indian International Bullion Exchange (IIBX) will enable India to influence global bullion prices as a principal consumer, said Ashok Gautam, Manager Director and CEO, IIBX in an exclusive interview with Moneycontrol.
Prime Minister Narendra Modi will open India's first national exchange, IIBX, on July 29 at Gujarat's GIFT City (Gujarat International Finance Tec-City). The project was first announced in the 2020-21 budget.
IIBX will facilitate efficient price discovery with the assurance of responsible sourcing and quality, apart from giving impetus to the financialisation of gold in India, International Financial Services Centres Authority (IFSCA) said in a statement.
The bullion exchange allows jewellers to trade, as well as set up the necessary infrastructure to store gold in bars, ingots and coins, said Gautam.
Until now, most of the gold coming into India was priced at the OTC (over-the-counter) market. However, this is the first time gold will be priced on IIBX in US dollars, he said. And as a process of disintermediation, which has been allowed for the first time, qualified jewellers can place their own bets.
The Reserve Bank of India has also permitted the facilitation of physical import of gold through IIBX or similar authorised exchange by qualified jewellers in India.
What is bullion?
Bullion refers to physical gold and silver of high purity that is often kept in the form of bars, ingots, or coins. IFSCA is the regulator of IIBX.
As per the government's notification, the International Bullion Exchange shall be the gateway for bullion imports into India, wherein all the bullion imports for domestic consumption shall be channelised through the exchange.
How will the bullion exchange work?
After registering with the IFSCA, qualified jewellers and bullion dealers who meet certain criteria prescribed by the IFSCA will be allowed to participate in the exchange.
Over 50 jewellers have already registered on the bullion exchange, including Malabar Gold Ltd, Sanghi Jewellery Pvt Ltd, and Titan Company Ltd.
Apart from qualified jewellers, non-resident Indians will also be allowed to participate, according to the RBI's guidelines.
However, "the traders can only come here on the bid side, and cannot sell the BDRs [Bullion Depositor Receipt] on the exchange," Gautam said.
BDR is digital-allocated gold, which is in the demat account.
Once the traders put in their bids, and when it is matched with the offer price, the BDRs will go to the demat account.
Once the gold comes into the IFSCA area through its vault, the gold gets converted into a BDR. The trader can then pay customs duty and convert the BDRs into physical gold, which can be imported to the BTA (Basic Trading Area).
"The BDRs will have a one-to-one congruence with the physical form of gold today and going forward, with silver and other precious metals as well," he said.
"On the other side, we have been interacting with foreign bullion banks and dealers, who have been showing interest to come on the selling side," said Gautam.There has been a whole ecosystem created around IIBX, he added.