Mumbai, Dec 24 : Inter-bank forward trading in gold is expected to become a reality in the Indian bullion market by the end of February 2001, if efforts of some five bullion banks approved by the Reserve Bank of India (RBI), go as planned. Since early 1997, the apex bank has permitted around 15 entities to import gold, including nationalised and foreign banks and a couple of state owned entities.Included in the list of banks which are busy making efforts to kick off inter-bank forward trading in gold include Bank of Nova Scotia, Standard Chartered Bank, State Bank of India and HSBC. What is more, global bullion banks like HSBC, JP Morgan and few others too have evinced keen interest to help the Indian government and the apex bank, to initiate process that will lead to setting up off futures trading in gold in the country, said Mr Bharghava Vaid, a leading bullion consultant to many banks.
``India being an important player in the global gold market can't remain an exception if forward trade in gold is permitted in other countries", says Mr Rajan Venkatesan of Bank of Nova Scotia. However, players in the domestic bullion markets currently trade gold only in spot markets and are therefore, exposed to the price volatility in gold prices because of the absence of any hedging mechanism-partial or otherwise -in the country even when the country annually imports around 550-plus tonne of gold each year. As in any other commodity, including foreign exchange, forward trading in gold too is an important partial hedging mechanism, whereby banks are able to buy and sell forward, the commodity at a mutually agreed price.
``Trading in gold forwards within select banks is a must if gold futures are to be introduced in the country,'' siad Mr Venkatesan of Bank of Nova Scotia. While there have been number of informal efforts to kick off forward trading in gold, the seed in this direction was sown in October when the Bank of Nova Scotia's president Simon Weeks (who is also the vice chairman of the London Bullion Merchants' Association - LBMA) was in India. ``Since then we have been meeting informally; preliminary discussions have been initiated and the banks seem to be receptive to the concept of forward trading in gold'', Mr Venketasan.
Interestingly, of late, RBI too is keen to see the strengthening of gold banking in the country, including trading in gold derivatives leading to a full fleged futures trading in the yellow metal.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.
