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Allow banks, mutual funds in commodity market: FMC

Commodity market regulator advocates the participation of banks, mutual funds and FIIs to increase trading in commodities.

business Updated: Apr 21, 2007 14:55 IST

Commodity market regulator Forward Market Commission (FMC) has strongly advocated the participation of banks, mutual funds and FIIs in advancing trading in commodities.

"It is very important for the growth of commodity market in India that the government should allow mutual funds, banks and FIIs," FMC Chairman S Sundareshan said while delivering a lecture on 'Commodity Future in India' in Ludhiana.

As a first step, he said, FIIs should be allowed to participate only in bullion, metal and crude commodities while banks should be permitted in agriculture commodities, he said.

FMC has proposed strict measures against members of commodity market in Forward Market (Regulation) Act Amendment Bill to safeguard the interests of the clients.

"Besides enforcing KYC (Know Your Customer) norms strictly, we have also proposed that in every three years, the account books of all the members should be audited," Sundareshan said adding that this year about 100 auditors would do the audit.

Last year, 50 auditors were deputed for the purpose, he said.

In order to study the impact of future trading on the prices of agriculture commodities, FMC has given a project to IIM Bangalore. "They will be submitting their report in the next couple of months," he said.

On deliveries of commodities, FMC Chairman said globally less than two per cent volume was taking place in deliveries. "The main purpose of forward trading was price discovery of a particular product at a given point of time," he said.