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FMC to take decision on MF at commodity markets

Forward Markets Commission will soon take a final decision on participation of mutual funds in commodity trading.

india Updated: Sep 30, 2005 15:25 IST

Forward Markets Commission will soon take a final decision on participation of mutual funds in commodity trading.

The FMC sub-committee, which is looking into the issue, is almost through with its review and is expected to submit its observation before the Commission shortly.

Confirming this, FMC Member Rajeev Agarwal said that "the sub-committee is soon going to present its report to the Commission for its consideration".

"Once the report is submitted, FMC will forward it to the Consumer Affairs Ministry along with its views for taking a final decision at the highest-decision making level," he said.

On allowing banks to take part in the commodity trading, he said necessary amendments were needed in Banking Regulation Act for this purpose.

"This issue is the prerogative of Reserve Bank of India", he said.

The Ministry of Consumer Affairs has already prepared a draft bill relating to the amendment to the Forward Contracts Regulation Act, 1952.

"In all probability, this bill will be introduced in the winter session of the Parliament after receiving Cabinet approval," said an official. At present, the Law Ministry is reviewing the draft bill.

The proposed amendment to FCR Act is expected to provide commodity market regulator FMC with more functional and financial autonomy, said a commodity expert.

The amendments also provide for setting of the Forward Markets Appellate Tribunal on the lines of Security Appellate Tribunal (SAT), he said.

The original act of 1952 provides well documented guidelines and the revamp act would only be modified version of the original document, making it more updated and suitable for current market conditions, said a top official of the Consumer Affairs Ministry.

Meanwhile, Agarwal said with the revamped version, the commoditiy market would witness even more "explosive" growth than what it has witnessed so far.

On introduction of 'Option Trading' at commodity markets, he said this would only be possible after FCR is amended".

The trade value at the commodity exchanges during 2004-05 increased by a whopping 341 per cent as against a rise of 94 per cent in trade value during 2003-04.

The daily trading volume at the three exchanges (two in Mumbai and one in Ahmedabad) already touched Rs 10,000 crore as against Rs 5,000 crore during the previous year.

Total value of trade in the first quarter of the current year in the three exchanges has been around Rs 3,02,000 crore, which is over 700 per cent of the volume of trade over the corresponding period of last year.

First Published: Sep 30, 2005 15:25 IST