RBI allows Indian bank branches in GIFT-IFSC to trade on international bullion exchange

The Reserve Bank of India (RBI) issued a circular on Friday allowing Indian bank branches in GIFT-IFSC to act as Trading Members or Trading and Clearing Members of the International Bullion Exchange IFSC Ltd (IIBX).

The RBI stated that Indian banks authorised to import gold or silver will serve as Special Category Clients (SCCs) of the International Bullion Exchange.

According to the RBI circular, IIBX Trading Members/Trading and Clearing Members (TM/TCM) may only execute trades on behalf of clients (no proprietary trading).

According to the current Foreign Trade Policy, the Reserve Bank grants annual import authorization to banks for gold and silver. 

The RBI stated that such banks, in addition to the consignment model in the domestic tariff area, are now permitted to operate as SCCs on the IIBX for gold or silver imports.

However, the central bank stated that the SCC will only execute buy trades on behalf of clients.

The SCCs will designate one of the IFSC Banking Units (IBUs) to act as a clearing member on their behalf.

According to the RBI circular, all client trades on the exchange must be accompanied by a 110 per cent advance pay-in of funds (buy order) of the expected value of bullion (quantity and quality specification) to be purchased and securities (sell order) in the bank's account, as applicable.

The circular states that on review, RBI has decided to additionally allow —

a) Branch/subsidiary/joint venture of an Indian bank in GIFT-IFSC to act as a Trading Member (TM)/Trading and Clearing Member (TCM) of IIBX, and

b) Indian banks authorized to import gold/silver to act as Special Category Client1 (SCC) of IIBX.

The detailed instructions in this regard are at ANNEX to the Circular.

2. These instructions are issued in exercise of the powers conferred on the Reserve Bank of India under Section 35A of the Banking Regulation Act, 1949. In the event of non-compliance with extant guidelines, or if the Reserve Bank is satisfied that it is necessary and expedient in the public interest to do so, it may issue further necessary directions (including revocation of approval) and/or impose additional conditions, as it deems fit.

Commencement

3. The provisions contained in the circular shall be effective from the date of this circular.

Applicability

4. This circular is applicable to all Scheduled Commercial Banks (other than Regional Rural Banks).