Capital Markets: Challenges and Developments

[pib] International Bullion Exchange

Note4Students

From UPSC perspective, the following things are important :

Prelims level : International Bullion Exchange

Mains level : Not Much

The International Financial Services Centres Authority (IFSCA) has inaugurated the pilot run/soft launch of the International Bullion Exchange scheduled to go live on October 1, 2021.

What is Bullion?

  • Bullion is gold and silver that is officially recognized as being at least 99.5% and 99.9% pure and is in the form of bars or ingots.
  • Bullion is often kept as a reserve asset by governments and central banks.
  • To create bullion, gold first must be discovered by mining companies and removed from the earth in the form of gold ore, a combination of gold and mineralized rock.
  • The gold is then extracted from the ore with the use of chemicals or extreme heat.
  • The resulting pure bullion is also called “parted bullion.” Bullion that contains more than one type of metal, is called “unparted bullion.”

The Bullion Market

  • Bullion can sometimes be considered legal tender, most often held in reserves by central banks or used by institutional investors to hedge against inflationary effects on their portfolios.
  • Approximately 20% of mined gold is held by central banks worldwide.
  • This gold is held as bullions in reserves, which the bank uses to settle the international debt or stimulate the economy through gold lending.
  • The central bank lends gold from their bullion reserves to bullion banks at a rate of approximately 1% to help raise money.
  • Bullion banks are involved in one activity or another in the precious metals markets.
  • Some of these activities include clearing, risk management, hedging, trading, vaulting, and acting as intermediaries between lenders and borrowers.

What is International Bullion Exchange?

  • This shall be the “Gateway for Bullion Imports into India”, wherein all the bullion imports for domestic consumption shall be channelized through the exchange.
  • The exchange ecosystem is expected to bring all the market participants to a common transparent platform for bullion trading.
  • It would provide efficient price discovery, assurance in the quality of gold, enable greater integration with other segments of financial markets and help establish India’s position as a dominant trading hub in the World.

Answer this PYQ:

What is/are the purpose/purposes of the Government’s ‘Sovereign Gold Bond Scheme’ and ‘Gold Monetization Scheme’?

  1. To bring the idle gold lying with India households into the economy
  2. To promote FDI in the gold and jewellery sector
  3. To reduce India’s dependence on gold imports

Select the correct answer using the code given below:

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

 

Post your answers here.
1
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abhishek anand
abhishek anand
10 months ago
Post your answers here." Read more »

3

Brijesh Choudhary
Brijesh Choudhary
10 months ago

C