Despite being one of the largest consumers of gold in the world, Indian precious metals market continues to lack price transparency as there has been no institutional mechanism to make it happen. To become a price setter in global trade, India needs to create that framework to develop transparent market linkage between domestic household stock and demand, Anjani Sinha, CEO of Indian Bullion Market Association and Managing Director of National Spot Exchange, India told Sreekumar Raghavan, Managing Editor, Commodity Online in an interview.

NSEL had promoted the Indian Bullion Market Association with the aim of setting up processes for an efficient price discovery mechanism for gold, silver bullion in India? Can you update us on the progress achieved so far highlighting your major activities?
The first level of this project is already implemented by making transparent prices available on electronic screen of National Spot Exchange. Today, you can see the benchmark transparent prices available on NSEL screen for different centers such as Mumbai, Ahmadabad, Kolkata, Hyderabad, Chennai etc. Most importantly, these prices are not polled prices or reference prices, rather they are actionable prices on which anybody can buy or sell. Since the quotes are available for both buy and sell, these are always authentic and nearer to the market prices. For instance, if the price is higher than the market, anybody can sell at that price and similarly, if the prices are low, anybody can buy at that price. Hence, electronic spot exchange displaying buy and sell quotes evolve transparent pricing models. Since NSEL is an open platform and not proprietary OTC platform of a specific bullion dealer, this creates an equal opportunity platform for all the bullion dealers and buyers to participate in such bullion trading under this mechanism.

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IBMA has taken step to initiate setting up of a complete integrated chain of distribution of bullion in the country. IBMA has recently introduced Gold coins, which are tradable through the electronic market set–up by National Spot Exchange. This enables the investors to buy gold coins through screen based trading. Such gold coins can be physically delivered or can be held in vault, while the investor gets a demat credit. In addition to operational ease, IBMA also provides buy back arrangement for the gold coins as per prevailing market price. In order to spread this concept across the country, IBMA has launched a massive drive to appoint “Master Distributors” across the country, who will create a complete forward integration for distribution of IBMA products upto the retail jewellary shops. This will link 3 lac jewellary shops functional across the country with the central nerve system of IBMA.

As on date we have gold and silver contract at various delivery location in different states. The details are below:
Gold: Andhra Pradesh (Hyderabad, Vijayawada), Gujarat: Ahmedabad, Rajkot), Maharashtra (Mumbai), Rajasthan (Jaipur), Tamilnadu(Chennai), West Bengal (Kolkatta)
Gold Coin: Andhra Pradesh (Hyderabad), Gujarat (Ahmedabad)
Gold Mini: Andhra Pradesh (Hyderabad, Vijayawada), Gujarat (Ahmedabad, Rajkot), Rajasthan (Jaipur), Tamilnadu (Chennai), West Bengal (Kolkatta)
Silver: Andhra Pradesh (Hyderabad), Maharashtra (Mumbai), Rajasthan (Jaipur), TN (Chennai)
Silver Granules 20: Andhra Pradesh (Hyderabad)
Silver Granules: West Bengal (Kolkatta)

How soon do you think India can become a price setter in global gold trade?
To become a price setter in global gold trade, prerequisite is to create an institutional framework to develop transparent market linkage between domestic household stock and demand and also with global market. Once this is achieved, price signals emerging from India will start influencing the global price discovery process of gold. India has been traditionally dependent upon import of gold for meeting its demand and therefore, global price movements virtually influence domestic prices tick by tick. On the other hand, export of bullion is not freely allowed from India. This implies that even though Indian investors are sellers at a price lower than international parity price, such stock cannot be freely exported overseas. This results into huge import disparity, leading to slowing down of import.  Continued...