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The State Bank of India (SBI) is keen to
tap the commodities futures market as they think it has considerable potential.
At present, the Banking Regulations Act does not permit the banks to invest in
the commodities though they are allowed to deal with bullion. The SBI has
sought the approval of the RBI to invest in commodities. The other banks that
are planning to invest in commodities are Punjab National Bank, Bank of India,
and Union Bank. SBI feels that it can cater to a wide
range of customers like farmers, manufacturers, and traders who are involved in
the commodities business with their wide network. The banks are keen on
offering all the products that are being traded in the multi-commodity exchange
as they expect the price support mechanism to be dismantled in the medium-term.
Though the commodities exchanges like
MCX and NCDEX offer futures in commodities like oil, gains, pulses, cotton,
plantation, bullion, and oil seeds the commodities market is still smaller
compared to the stock markets unlike the developed countries where the
commodities are several times bigger than the stock markets. It is still not
clear the exchange in which SBI will seek membership. The banks are not
required to float a separate subsidiary for dealing with commodities and they
can simply do so by creating a specialised desk. Though the government is keen on SBI
taking membership in the interest rate derivatives segment to boost the
liquidity and transparency in the market, the SBI feels that the volumes would
be far lower as compared to the commodities. In the case of the interest rate
derivatives, the Securities Contract (Regulation) Act recognises only those
deals that are traded and settled in the clearing-house of the stock exchanges.
However, the banks are unlikely to face any restrictions on the commodities
derivatives business except for the Banking Regulation Act. |
