FMC unveils uniform norms for accreditation of warehouses

Written by PTI | New Delhi | Updated: Aug 29 2014, 09:15am hrs
To strengthen warehousing facilities in the commodity futures market, regulator Forward Markets Commission has come out with uniform norms for accreditation of warehousing service providers.

The draft rules, on which comments have been sought by September 15, come in the wake of the R5,600 crore payment scam at National Spot Exchange (NSEL) that surfaced in July last year, exposing loopholes in the system.

The proposed changes are being made because at present no uniform norms are being followed by national level commodity exchanges for accreditation of warehousing service providers (WSPs). "In order to ensure uniformity at all national commodity exchanges, the commission has decided the norms regarding ownership, net worth, corporate governance etc, for WSPs for accreditation with the National Multi-Commodity Exchanges (NMCEs) shall be as follows," FMC said.

As per the draft, a WSP should have a minimum net worth of R5 crore for providing services for a single commodity and R10 crore for multiple commodities. The promoter of the WSP should be in the business for at least three years. He should be of "repute" and have "credible market standing".

WSPs should furnish security deposit of about 2% for value less than or equal to R250 crore of the goods stored, 3% for the value of R250-500 crore and 5% for above the value of R500 crore of goods. "Daily monitoring of security deposits vis-a-vis the value of the commodity stored needs to be done so as to ensure the minimum stipulated security deposits is always maintained with the exchange," FMC said.

The exchange may ask for additional security deposit like bank guarantee from approved bank, fixed deposit receipt, cash or other forms of liquid security deposit as may be deemed acceptable by the exchange, it added.

FMC said a WSP should preferably be a corporate body with a professional management team. "WSP should ensure ownership and management is separate and an arm's length relationship is maintained with promoter/promoter group entities/relatives of the promoters, and the major suppliers and customers of these entities," the FMC said.

The WSP should set up a number of panels to oversee operations as may be prescribed by the exchange subject to the condition that there should always be an audit committee of the WSP comprising of independent professionals.

According to the draft, a WSP should have a 'customer grievances cell'. The exchanges should have a 'Know Your Depositor Policy' which needs to be complied with by a WSP. FMC said WSP should ensure there is no conflict of interest with the interests of the exchange and the depositors/lawful owners of goods.

For accreditation purpose, a WSP should have sound facilities and infrastructure to store commodities. It should have insurance cover for stored commodities and comply with the provisions of the exchange's rules, regulations and by-laws, besides various central and state laws.