Indian entities can hedge their exposure to gold price risk in overseas markets on recognised exchanges in the International Financial Services Centre (IFSC), Gujarat, said RBI Governor Shaktikanta Das on Wednesday.
Announcing the Monetary Policy Committee's (MPC) decision to increase the repo rate by 35 basis points, Das said: "Resident entities in India are currently not permitted to hedge their exposure to gold price risk in overseas markets."
"With a view to providing greater flexibility to these entities to hedge the price risk of their gold exposures, resident entities will now be permitted to hedge their gold price risk on recognised exchanges in the IFSC. This measure will benefit importers/exporters of gold such as jewellers and industries which use gold as an intermediate or raw material," Das said.
Welcoming the decision Colin Shah, Managing Director, Kama Jewelry said: "The RBI's approval to hedge gold at IFSC is a positive move and a major enabler for gold importers and exporters using yellow metal as the primary raw material for production. This will help increase the price competitiveness of the Indian jewellery industry."
"It will help the players hedge their positions against price fluctuations and unfavourable currency movement. This will also lead to an increase in volumes and activities at IFSC," Shah added.
