Allow banks as intermediaries in commodities futures market: Assocham

February 09, 2012

To increase the penetration of savings instruments and upgrade financial literacy in rural areas, industry body Assocham has called for permitting banks as intermediaries in commodities futures market so that economic benefits of development spread beyond urban pockets. By virtue of their vast branch network, banks are in a unique position to display tickers showing real-time prices of various commodities across the country which will be the most efficient price discovery dissemination that could be implemented in a very short time,But banks are not permitted to engage in commodity derivatives business.



Though the country has a high savings rate, the participation of urban population with high incomes in agricultural segment is minimal due to lack of suitable investment opportunities and absence of credible intermediaries dealing with agri-based investment products. The primary result of such participation will be to improve the depth of market and price discovery.

A wide variety of agricultural commodities, crude oil, base and precious metals are actively trade in India through three online exchanges – NCDEX, MCX and NMCE. Organised commodity futures trading offer a viable, efficient and globally-accepted alternative to manage the price risk and hence improve agricultural growth.



Many banks – especially nationalised banks – have been engaging in agriculture and rural-based activities and commodity futures will adapt well to their business. Such participation will transform commodity futures into an effective tool for national development, said Assocham in communication to the finance ministry, the Reserve Bank of India and the ministry of consumer affairs, food and public distribution.


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