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On July 29, Prime Minister Narendra Modi will inaugurate India’s first bullion exchange, the India International Bullion Exchange (IIBX), at Gujarat’s GIFT (Gujarat International Finance Tec-City), India’s first International Financial Services Centre (IFSC) (located between Ahmedabad and Gandhinagar).

The bullion exchange, which was announced in the 2020 Union Budget, has not only enrolled jewelers to trade on the exchange but has also established the necessary infrastructure to store physical gold and silver.

Who is eligible to trade on the IIBX?

Qualified jewelers will be able to import gold via the IIBX.

To become qualified jewelers, entities must have a minimum net worth of Rs 25 crore and 90 percent of their average annual turnover in the previous three fiscal years from dealing in precious metals.

For the first time since the liberalization of gold imports through nominated banks and agencies in the 1990s, eligible qualified jewelers in India have been allowed to directly import gold through IIBX, as notified by the International Financial Services Centers Authority (IFSCA). “This reform allows qualified jewelers to participate directly on IIBX for the purpose of importing gold,” an official said.

Non-resident Indians and institutions, in addition to qualified jewelers, will be able to participate in the exchange after registering with the IFSCA. Institutions such as Funds for Golf ETF are expected to participate in the medium term.

Additionally, jewelers will be able to trade on IIBX as trading members or as clients of a trading member. A qualified jeweler can become a trading member by establishing a branch or subsidiary in an IFSC (international financial services centre) and applying to the IFCSA.

What are the benefits of an Indian bullion exchange?

The IIBX will serve as a gateway for bullion imports into India, with all bullion imports for domestic consumption passing through it. A bullion exchange will offer the benefits of price discovery, transparency in disclosures, guaranteed centralized clearing, and quality assurance, in addition to providing a trading avenue for various participants. A bullion exchange would be an important step toward the financialization of bullion-based products, in addition to providing standardization and a transparent mechanism.

How was the exchange foster?

During her Budget speech in 2020, Union Finance Minister Nirmala Sitharaman announced the establishment of IIBX at the IFSC in Gujarat. The Memorandum of Understanding (MOU) between Central Depository Services (India) Limited, India INX International Exchange (IFSC) Limited, Multi Commodity Exchange of India Ltd, National Securities Depository Limited, and National Stock Exchange of India Ltd then aided in the formation of the holding company, India International Bullion Holding IFSC Ltd. (IIBH). Later, this holding company established IIBX, Bullion Clearing Corporation, and an IFSC Bullion Depository.

The International Financial Services Centres Authority (Bullion Exchange) Regulations, 2020, for the trading of precious metals, including gold and silver, were notified in December 2020. These rules apply to bullion exchanges, clearing corporations, depository institutions, and vaults, among other things.

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