India's securities market regulator, the Securities and Exchange Board of India (Sebi), is actively collaborating with the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI) to pave the way for banks and insurance companies to participate in the commodities derivatives markets. This significant move was announced by Sebi Chairman, Tuhin Kanta Pandey, on Saturday in New Delhi.
Working Groups to Deepen Commodity Markets
Pandey revealed that dedicated working groups have been established to suggest measures for deepening the Agri Commodity Derivatives ecosystem. These expert panels are undertaking a comprehensive review of the existing regulatory framework. Their focus areas include examining whether rules concerning margins, position limits, and delivery and settlement mechanisms can be optimized to enhance market efficiency while steadfastly protecting market integrity.
"Their recommendations will assist us in taking necessary developmental measures after due consultation with all stakeholders," the Sebi chairman stated while addressing a conference in the national capital. He added that a separate working group for reviewing the non-agri commodity derivatives segment will be notified shortly.
Focus on Awareness and Resolving GST Issues
Elaborating on the regulator's outreach efforts, Pandey cited a Sebi investor survey which highlighted an urgent need for targeted awareness and education programmes. Sebi's current initiatives are directed at key stakeholders including:
- Farmer Producer Organisations (FPOs)
- Exporters and importers
- Students and faculty of agricultural colleges
- Hedgers and Micro, Small & Medium Enterprises (MSMEs)
Outreach programmes with FPO representatives are specifically designed to identify the practical challenges they face in accessing the market. On the policy front, Sebi will continue its engagement with the government to resolve GST-related issues for participants who wish to receive or deliver physical commodities through the Exchange platform.
Push for Regulated Gold Products
Pandey emphasized the availability of regulated gold products in domestic markets, which include commodity derivatives, Gold ETFs, and Electronic Gold Receipts (EGRs). He assured that these regulated products ensure robust investor protection. The EGR framework, in particular, was conceived to create a regulated marketplace for gold trading and to position India as a global price setter for gold.
"While the EGR framework may need a review, I urge the industry to educate its participants and investors to deal only in regulated gold products," Pandey advised. Concluding his address, he affirmed Sebi's commitment, stating, "As we look to the future, commodity markets and their participants will be high on our regulatory and developmental agenda."
