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Sale of Gold/ Silver/ Platinum - Forward Contract
DBOD.
No. IBS. 817 - 23.67.001- dated 26th October 2002
As
you are aware, forward trading in gold was prohibited under the Forward
Contracts (Regulation) Act, 1952. Government of India, Ministry of Food and
Consumer Affairs, in terms of their notification dated the 19th August
1999 exempted all forward contracts for sale and purchase of gold within the
country from the provisions of the above Act if one of the parties to the
contract is:
(i)
The Reserve Bank of India or
(ii)
a scheduled bank as defined in section 2(e) of the Reserve Bank of India
Act, 1934 and which is authorized by Reserve Bank of India to deal with or to
transact in gold.
2.
Following the relaxation as above, RBI vide circular
DBOD.No.IBS.BC.912/23.67.001/99-2000 dated October 5, 1999 on Gold Deposit
Scheme, permitted banks authorized to deal in gold to enter into forward
contracts in India for buying and selling of gold with only those banks which
are authorized by Reserve Bank to import gold. These banks were, however, not
permitted to enter into forward contract in gold with other counter parties.
3.
We have been receiving representations from jewellery exporters and other
domestic jewellers for the facility of forward cover in respect of gold deals
entered into by them with authorized banks. The matter has been reviewed and it
has been decided to permit authorized banks to enter into forward contracts with
their constituents (exporters of gold products, jewellery manufactures, trading
houses etc.) in respect of the underlying sale/ purchase and loan transactions
in gold with them. The tenor of such contracts should not exceed six months.
Banks should put in place appropriate risk management mechanism for the purpose,
like hedging their position either with other authorized banks or through
exchange-traded and over-the-counter hedging products available overseas, etc.
as already permitted vide our Exchange Control Department circular A.P. (DIR
Series) Circular No. 19 dated January 24, 2002.
4.
Please acknowledge receipt.
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