Industry body seeks FI, FII participation in commodities futures

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New Delhi, Oct 28: The Associated Chambers of Commerce and Industry Friday asked the government to allow banks, mutual funds, financial institutions, and foreign institutional investors to trade in commodity futures to spur further growth. Entry of banks will help them hedge risks related to default on agricultural loans, Assocham said.

Labanyendu Mansingh, secretary, consumer affairs, said on Wednesday the government favours banks and financial institutions’ participation in the booming commodities trade. The government had allowed commodities futures three years ago, with the Forward Markets Commission being the market regulator.

However, banks, mutual funds, financial institutions, and foreign institutional investors were not allowed to take part in commodities futures. With the participation of banks, mutual funds, financial institutions and FIIs, services like warehousing, gradation and certification services, financial intermediation, modern marketing practices, modern clearing, and settlement mechanism will get strengthened, the release

said. Commodities constitute 58% of India’s gross domestic product while agriculture accounts for 22%.

Crisil MarketWire

The total volume of trade on the Indian commodities exchanges has shot up to Rs 7.8 trillion during the first half of the current fiscal, compared with the Rs 5.71-trillion trade last year.

ASSOCHAM said states must amend their legislation for agriculture produce marketing to facilitate free movement of commodities across state borders. The point had also been stressed by Prime Minister Manmohan Singh and Agriculture Minister Sharad Pawar on earlier occasions.