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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Mark Bartlett who wrote (31486)	4/10/1999 9:56:00 PM
From: lorne	Respond to of 116790

INDIA. RBI to seek government approval for gold futures April 10 1999. Sowmya Sivakumar in Mumbai The Reserve Bank of India is planning to make a representation to the government for permitting domestic forward trading in gold. "Allowing domestic forward trading in gold has been discussed with the ministry of finance in various fora and we are now planning to give a formal representation," said sources. Recently, the Indian government had permitted hedging of commodities in the international forward markets, including gold. However, this does not allow for hegding of gold in the domestic market. The introduction of domestic forward trading in gold requires a notification from the government under section 27 of the Forward Contracts Regulation Act (FCRA) which gives the central government powers to exempt any kind or class of contracts from the purview of the FCRA. The main rationale behind allowing domestic hedging against gold is to protect banks from a price risk. Banks which accept deposits in gold and sell it in the domestic market bear a price risk and presently there is no cover against this. Bankers feel that the facility of hedging against gold is important for banks to aggresively enter into accepting gold deposits. "Permitting hedging in the domestic market is being viewed as a medium to long term strategy that will be necessary if the concept of gold trading has to really take off," the sources said. "We envisage a domestic forwards market in gold similar to the forex market, with active trading up to six months initially," they added. The RBI has presently allowed banks to deploy gold that will be garnered through the deposit schemes in the form of loans to domestic jewellers. Another option under consideration is permitting banks to swap this gold into dollars for deployment. In the union budget for 1999-2000, the finance minister had given a major thrust to gold banking by announcing the lauch of a gold bond scheme with exemptions on incoem tax, wealth tax and capital gains tax. According to the scheme envisaged, the deposit holder would get gold bonds in return which would be tradeable. business-standard.com