“This transaction marks the beginning of access for resident Indian companies to the deep liquidity “We are able to leverage our expertise in the global bullion market and manage our price risk efficiently through customized derivative solutions,” Parul Mittal Sinha, head of financial markets, India and South Asia and co-head of macro trading, Standard Chartered Bank, told ET.
The over-the-counter (OTC) derivatives deal, worth $4 million and valid for six months, was struck between the UK-based bank’s IFSC Banking Unit in GIFT City and a major branded jewellery manufacturer, industry sources said.
On June 27, 2024, IFSCA, which is the regulator of the International Financial Services Centre (GIFT), said it had decided to allow IFSC Banking Units (IBUs) to conduct OTC trading. derivatives on gold and silver and offer such derivatives to its clients.
Regulations allow companies exposed to the risk of the price of imported gold, as well as gold produced or acquired in the country, coverage such risk through OTC derivatives at the International Financial Services Centre in GIFT City. In a master directive issued in December 2022 and subsequently updated in April this year, the Reserve Bank of India had said that eligible entities having exposure to gold price risk can hedge such exposure at the International Financial Services Centre (IFSC), subject to certain stipulations. The RBI had said that banks may allow eligible entities to hedge commodity price risk and overseas freight risk, including IFSC, using permitted products and may remit foreign exchange in respect of such transactions after satisfying themselves that the entities have exposure to such price risk, whether contracted or anticipated. The central bank also said that banks should be satisfied that the amount proposed to be hedged and the tenor of the hedge are in line with the exposure and that in case of OTC derivatives, the requirement to undertake OTC hedging is justified.
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