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India’s First International Bullion Exchange

Context:

Prime Minister has launched India’s first International Bullion Exchange (IIBX) at the Gujarat International Finance Tec-City (GIFT City) near Gandhinagar.

Relevance:

GS III- Indian Economy

Dimensions of the Article:

  1. What is Bullion?
  2. What is the IIBX?
  3. How will it work?
  4. Advantage of an exchange
  5. Significance of IIBX

What is Bullion?

  • Bullion is the term for high purity physical forms of gold and silver that are frequently stored as bars, ingots, or coins.
  • It is frequently kept by central banks as reserves or held by institutional investors, and it is occasionally regarded as legal tender.

What is the IIBX?

  • India for the first time had liberalised gold imports through nominated banks and agencies in the 1990s.
  • Now, the eligible qualified jewellers in India have been allowed to directly import gold through IIBX.
  • For this, jewellers will have to become a trading partner or a client of an existing trading member.
  • In addition, the exchange has set up necessary infrastructure to store physical gold and silver.
  • The exchange will sell physical gold and silver and aims to be set up on the lines of the Shanghai Gold Exchange and Borsa Istanbul in order to make India a key regional hub for bullion flows.

How will it work?

  • The thought process behind setting this up is to enable the trading of commodities on an exchange.
  • Since this is international exchange, trading can take place in US dollars as well.
  • India has positioned itself as one of the biggest trading hubs in Asia.
  • Because of the competitive pricing on IIBX, international players will be happy to use our vaulting services.
  • Moreover, with this being a free trade zone, no duty will be paid.

Advantage of an exchange

  • Bullion is made available across special economic zones (SEZs) at International Financial Services Centres Authority (IFSCA)-approved vaults through the disintermediation of transactions through an anonymously traded exchange platform, which means the growth of IIBX is not just limited to GIFT City but across jewellery manufacturing hubs nationwide.
  • This will encourage jewellers to manage their inventories just-in-time.
  • Additionally, it will increase pricing and order sequencing transparency, eliminating any potential for undue supplier, importing, or logistics agency bias.

Significance of IIBX

  • The IIBX will serve as the “Gateway for Bullion Imports into India,” and all imports of bullion for use domestically must pass via the exchange.
  • The exchange ecosystem is anticipated to connect all market participants to a single, transparent platform for trading bullion, allowing for more seamless integration with other areas of the financial markets and efficient price discovery.

-Source: The Hindu, PIB


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