Context: Recently, State Bank of India (SBI) announced that it has become the first bank to become a Trading cum Clearing (TCM) Member at India International Bullion Exchange (IIBX).

• This move enables SBI’s IFSC Banking Unit (IBU) to trade on the IIBX platform as the RBI allowed IBUs to act as trading members and clearing members at IIBX as Special Category Clients (SCCs) for importing gold through the bullion exchange.

Key highlights

• This milestone enables SBI’s IFSC Banking unit (IBU) Gift City to conduct trades on the IIBX platform and settle them on behalf of its clients.

• RBI guidelines permitted branches of an Indian Bank in GIFT IFSC to act as a trading member (TM)/trading and clearing member (TCM) of IIBX.

• The central bank also allowed special category clients (SCC) which are nominated banks in India to import gold through IIBX.

Significance

• The entry of India’s largest bank into the field as a TCM is poised to boost trading volumes at IIBX.

• This step marks a change in India’s bullion market, ushering transparency, efficiency, and accessibility in the bullion trading market and solidifies SBI’s commitment to innovation and excellence in the financial sector.

Background: What is bullion?

• Bullion refers to physical gold and silver of high purity that is often kept in the form of bars, ingots, or coins.

• Bullion can sometimes be considered legal tender and is often held as reserves by central banks or held by institutional investors.

India International Bullion Exchange (IIBX)

• The India International Bullion Exchange (IIBX) is India's first bullion exchange, launched in 2022 in Gujarat.

• IIBX was launched in the GIFT International Financial Services Centre (IFSC). It is the 3rd exchange of its kind in the globe.

• Purpose: IIBX serves as India’s first international bullion exchange, facilitating the import of bullion and offering a comprehensive ecosystem for bullion trading and investment.

• Functions and Features

• i) Transparent Price Discovery: It ensures clear pricing mechanisms for bullion.

• ii) Responsible Sourcing: It focuses on integrity and ethical sourcing within the supply chain.

• iii) Quality Assurance and Standardization: It maintains high standards of quality and uniformity in bullion trading.

• Regulation and Management: It is governed by the International Financial Services Centers Authority (IFSCA), which oversees financial products, services, and institutions within IFSCs.
• Competitive Edge: It offers a variety of products and technologies at competitive prices compared to both Indian and major global exchanges like those in Hong Kong, Singapore, Dubai, London, and New York.

Prior to IIBX

• India’s bullion market is one of the largest in the world, the second largest in terms of consumption and holds an important position globally. However, it lacked organisation and structure.

• Gold is tightly regulated in India and earlier only nominated banks and agencies who were approved by the central bank could import gold and sell to dealers and jewellers.

About International Financial Services Centers Authority (IFSCA)

• It was created under the International Financial Services Centres Authority Act, 2019.

Objectives and Functions

• It aims to connect with global financial markets and cater to the needs of the Indian economy.

• It has been tasked with developing and regulating financial services and institutions within IFSCs.

Regulatory Framework

• Before IFSCA, various domestic financial regulators like RBI, SEBI, PFRDA, and IRDAI were responsible for regulatory functions in IFSCs.

Significance of GIFT-IFSC

• GIFT-IFSC is India’s inaugural International Financial Services Centre, pioneering the integration of financial services with global markets under a unified regulatory body