Commodity Online
MUMBAI: Financial markets are in turmoil as global credit crisis and the virtual collapse of investment banking have spread panic across the continents. But amidst these days of gloom, there is good news for commodity broking in India.
After debating for four years, the Indian government has finally decided to allow foreign investment in commodity broking business. Top government officials said that already the Ministry of Finance has approved the proposal to allow 100% foreign direct investment in commodity broking business.
Commodity futures trading began in India six years ago with strict rules and regulations. One such regulation was that FIIs, banks and mutual funds can not and should not invest in commodity broking business.
Early this year, the government relaxed the rules by allowing 26% percent foreign investment in commodity exchanges with a condition that no single entity can hold more than 5% per cent stake in commodity exchanges.
While FDI is allowed now in commodity exchanges like MCX, NCDEX and NMCE upto 26%, the same has not been permitted in commodity futures broking industry.
Last week, the Ministry of Finance in consultation with the Department of Industrial Policy and Promotion decided to give in-principal approval to allow 100% foreign investment in commodity broking companies. Officials said the in-principle approval from the Finance Ministry has to be now vetted by the Reserve Bank of India.
Several broking firms that had attracted foreign investment last year had to hike off their commodity broking business as the rules did not allow FII entry into commodities. Broking companies said that the new rule will greatly help them to grow the commodity business.
”This is a welcome step. Foreign investment in commodity broking will immensely help broking companies that have been demanding entry of FIIs, banks and mutual funds into India’s commodity broking industry,” Giby Mathew, Director of JRG Wealth Management, a leading commodity broking firm said.
He said this will help the commodity broking business in India to mature and get into the next level. “We feel participation of FIIs in India’s commodity broking business will Lead to the entry of large global commodity players into the country,” Mathew added.
