Page 10 - Bullion World Volume 4 Issue 10 October 2024

Bullion World | Volume 4 | Issue 10 | October 2024

Recognizing the pivotal role of banks in the precious hedging activities. This has since been facilitated by the
metals ecosystem, whether OTC or exchange-based, RBI through a notification dated April 15, 2024. Foreign
the IFSCA proposed to the RBI that Indian banks be banks have already initiated hedging operations through
permitted to participate in the exchange ecosystem of their GIFT-IFSC branches in GIFT City, providing hedging
the India International Bullion Exchange IFSC Limited products to resident entities with gold price exposure.
(IIBX) to enhance transparency and price discovery. The Indian gold market is now very attractively placed in
In response, the RBI issued a circular on February 9, the precious metals’ ecosystem globally. The World Gold
2024 , allowing Indian banks to participate in the IIBX. Council forecasted that India may consume around 850
Subsequently, the International Financial Services tonnes in 2024 compared to 750 tonnes in 2023 which
Centers Authority (IFSCA) issued a circular containing is largely attributed to good monsoon and reduction in
the guidelines for participation by Nominated Banks custom duty on gold . The custom duty on import of gold
importing gold and silver through IIBX, on April 19, 2024 was reduced to 6% from 15% earlier vide Notification
, titled “Import of gold and silver by Indian Banks through No. 33/2024-Customs dated July 23, 2024.
India International Bullion Exchange IFSC Limited (IIBX),”
which permits nominated banks to participate as Special This has resulted in strong demand for gold in the
Category Clients (SCC) on the exchange. Prior to this, month of August 2024, where India imported around
the import of gold was restricted to nominated banks as 140 tonnes. The per capita consumption of gold in India
notified by the RBI, nominated agencies as notified by is currently around 0.53 grams, which is significantly
the Director General of Foreign Trade (DGFT), Qualified lower than many other countries . India also has a
Jewellers as notified by the IFSCA, and valid India-UAE strong cultural affinity for gold, which is reflected in the
CEPA Tariff Rate Quota (TRQ) Holders as notified by the country's high jewellery consumption which was around
IFSCA. 576 tonnes in 2023 . S&P Global India has forecasted
that India will become the third-largest economy in the
The RBI circular enables the Indian Banks to participate world by 2031 . This economic growth is likely to lead
as Trading Member (TM) / Trading cum Clearing Member to a significant increase in per capita income, which
(TCM) and SCC of IIBX. The TM/TCM shall execute could create a significant opportunity for growth in gold
trades only on behalf of clients (without proprietary consumption in India. As people's incomes rise, they may
trading) and the SCC shall execute only buy trades on allocate a portion of their increased spending to gold.
behalf of clients. Thus, Indian banks are now permitted Indian investors is also allocating funds to gold ETFs,
to undertake trading and clearing operations on behalf evidenced by a recent surge in AUM and gold holdings,
of foreign banks. This enablement led to the beginning now reaching approximately 52 tonnes.
of participation of major Indian Banks like SBI, ICICI
Banks and HDFC Bank as TCM on IIBX . Following this, The recent repatriation of 100 tonnes gold from the Bank
it is anticipated that many other major bullion importing of England is a significant indication that the RBI, as a
Indian banks may commence their operations on IIBX central bank, prioritizes holding custodianship within the
soon. country's borders, reflecting the strength and stability of
the national economy. The timing of the RBI's repatriation
The IFSCA had also submitted a proposal to the RBI to and the rise of the GIFT Precious Metals ecosystem
allow resident entities with gold price exposure on IFSC could not be more opportune. The country's strong
exchanges or the OTC market in IFSC to participate in economic growth, coupled with its cultural affinity for

4. https://ifsca.gov.in/Viewer?Path=Document%2FLegal%2Fimport-of-gold-and-silver-by-indian-banks-through-iibx19042024062249.
pdf&Title=Import%20of%20gold%20and%20silver%20by%20Indian%20Banks%20through%20India%20International%20
Bullion%20Exchange%20IFSC%20Limited%20%28IIBX%29&Date=19%2F04%2F2024
5. https://ifsca.gov.in/Directory/index/P6YtcC69GoU=
6. https://economictimes.indiatimes.com/industry/cons-products/fashion-/-cosmetics-/-jewellery/wgc-raises-indias-gold-consumption-
projection-to-850-tonnes-in-2024/articleshow/112904746.cms?from=mdr
7. https://taxinformation.cbic.gov.in/view-pdf/1010125/ENG/Notifications
8. https://www.gold.org/goldhub/gold-focus/2024/09/indias-gold-market-update-gold-market-broadens-expansion-physical
9. https://www.gold.org/goldhub/data/gold-demand-by-country
10. https://www.metalsfocus.com/product/gold-focus/

10