Mumbai: Desi Gold bars will be used to settle Futures contracts traded on the NSE platform.
The exchange on Friday, July 10, 2020, announced the launch of NSE refiner standards (NRS) as a policy for standard gold delivery. "The NSE Refiner Standards for BIS – Standard Gold would enable the acceptance of gold bars produced by the domestic refiners in India, for settlement of the gold futures contracts traded on the NSE platform," read a filing.
Previously, bars assayed by the London Bullion Merchants Association were approved to be used in settling contracts on the derivative segment of NSE. With the new policy, bars refined by domestic manufacturers in India stand accepted.
"Until July 9, 2020, NSE accepted serially numbered gold bars produced by London Bullion Market Association (LBMA) approved refiners for settlement of the gold contracts traded on the commodity derivatives segment of NSE," further read the filing.
"However, taking into account the fact that there are several Indian refiners having capabilities of producing the gold bars as per Bureau of Indian standard (BIS) notified standards - IS 17278: 2019, it has been decided by the exchange to accept gold bars produced by specified Indian refiners adhering to the above BIS notified standards," said the NSE.
The NSE believes the policy-tweak to help domestic refiners, in line with the government's Atmanirbhar Bharat calls.
Ravi Varanasi, chief business development officer, NSE in a report explained, "With the launch of NRS for BIS – Standard Gold, NSE aims to offer a fair chance to the Indian refiners, adhering to the BIS notified standards, to be a part of the exchange settlement framework. This initiative demonstrates NSE's vision and commitment towards inclusive growth of all market participants."
The NSE move is expected to be a major gain for refiners such as MMTC-PAMP, Chemmanur Gold refinery, Rajesh Exports, Bangalore Refinery, etc that reported a collective output of approximately 900 tonnes in 2018. Of the nearly 20 domestic Indian miners, the Mumbai-based Shirpur Gold refinery with 217 tonnes of annual refining is the largest.
The NRS implementation is around a time of high gold prices and low imports. India's April-May-June imports have dwindled even as jewellers remained locked-down owing to restrictions. Bullion, in stark contrast to sagging economic outlook, has picked up on investor sentiment - rallying to levels of Rs 49,000 per ten grams.
Unfortunately, the unusual volatility in Gold comes at a time of high uncertainty for the domestic refiners. At least half of the country's gold refiners were reportedly shut owing to Covid and low dore imports, according to this ET report. Insufficient supply of dore (raw material) has affected refining units of Maharashtra and West Bengal.
Besides the NSE, the MCX (Multi Commodity Exchange) was also reportedly considering a similar policy-tweak to work with desi refining units. So far, the MCX approves settlement by way of physical gold refined by an approved list of domestic refiners in addition to LBMA assayed bars.
Last year, trade body IBJA (Indian Bullion Jewellers Association) requested the Reserve Bank of India to consider allowing only NABL or BIS accredited agencies to supply gold bars with the objective of reducing issues of impurity or unethical sourcing for better transparency in the business. In its letter to the RBI, the IBJA asked, "We request you to completely ban the manufacturing of gold bars/mini gold bars by non-regulated, unauthorised refiners with immediate effect... The stoppage of such gold bars will result in complete transparency as to the purity of gold, sourcing and accounting of gold in our country."
Disclaimer: The image is used only for representational purposes. Attributed to JOEL SAGET for AFP.