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’?
- To bring the idle gold lying with India households into the economy
- To promote FDI in the gold and jewellery sector
- 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.
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