Commodity Online
MUMBAI: Several global banks are lining up majors plans to enter into bullion trading in India as the country has emerged as one of the biggest and most active marketplace for spot and futures gold trade.
The booming gold market in India that imports and consumes the largest quantity of the yellow metal in the world is attracting global players. India imported nearly 400 tonnes of gold in 2008. Gold imports and sales have been sluggish in 2009, but analysts have predicted that bullion market will continue to be booming in India in the years to come.
Therefore, leading global banks are chalking out plans to trade gold in India. They include HSBC, Scotiabank, Standard Bank and Citibank. They plans from these banks include launching whole sale trading and hedging in gold, import of gold and tying up with India’s local banks to sell gold coins and start several gold deposit schemes.
Scotiabank, Canada’s second-largest bank, is the final stages of launching trading and hedging in gold and other precious metals like diamonds, platinum and palladium in India.
Scotiabank has applied to India’s Commerce Ministry to start wholesale trading and hedging in precious metals.
If Scotiabank is given permission, the bank may enter into a strategic tie up with either HDFC Bank or ICICI Bank to start trading in gold and other precious metals through India’s commodity exchanges. Scotiabank is in the process of setting up a wholly-owned subsidiary to trade in gold.
Already, Scotiabank has branches in major Indian cities like Mumbai, New Delhi, Bangalore and Coimbatore. The Canadian bank now plans to increase its branch network in India. A Scotiabank official told Commodity Online: “We are planning to foray into commodities trading in India. Our target is gold, as for people in India, gold is the best investment opportunity.”
He said the bank has plans to participate in wholesale trading and hedging in precious metals, import and export of metals and deal in trading of precious metal commodity derivatives.
India permits a foreign investment up to 100% under the automatic route in the wholesale cash-and-carry trading and trading for exports.
Scotiabank is one of the North America’s leading financial institutions. It has a presence in 50 countries with over 2,000 branches. India, banking majors like HDFC and ICICI and India Post, the postal arm of the government of India, are aggressively promoting gold trading and gold coin sales.
Experts say plans by foreign players like banks to enter into gold trading in India bodes well for the massive bullion industry in the country. “India is the largest importer and consumer of gold in the world. So it makes sense for banking majors to cash in on the gold business in the country,” Harish Chawla, a bullion analyst in Mumbai.
The Indian gems and jewellery industry is one of the fastest growing segments in the Indian economy with an annual growth rate of approximately 15 per cent.
The domestic market is estimated to be around US$ 16.1 billion and the All India Gems and Jewellery Trade Federation, a nodal agency representing 300,000 jewellers across the country, expects it to grow to US$ 25.2 billion in two to three years.
The country is also the largest consumer of gold in the world. It consumes nearly 800 tonnes of gold that accounts for 20 per cent of world gold consumption, of which nearly 600 tonnes go into making jewellery.
India is also emerging as the world's largest trading centre for gold targeting US$ 16 billion by 2010. The industry has the best skilled manpower for designing and producing high volumes of exquisite jewellery at low labour costs.
