Standard Chartered Bank has completed its first over-the-counter (OTC) derivative deal for hedging gold prices from Gujarat International Finance Tec-City (GIFT City). This comes about two months after the International Financial Services Centres Authority (IFSCA) allowed such transactions.
“This marks the start of Indian companies using global bullion market liquidity to manage their gold price risks with custom solutions,” said Parul Mittal Sinha, Head of Financial Markets for India and South Asia at Standard Chartered Bank.
The $4 million deal, which had a six-month duration, was carried out between the bank’s GIFT City unit and a well-known jewellery maker, according to industry sources.
On June 27, 2024, the IFSCA gave permission for Banking Units in GIFT City to offer OTC derivatives on gold and silver to their clients. These regulations help companies manage gold price risks for both imported and locally sourced gold using OTC derivatives at GIFT City.
The Reserve Bank of India (RBI) had earlier set guidelines that allow entities with exposure to gold price risks to hedge those risks at the International Financial Services Centre (IFSC) in GIFT City. The RBI requires banks to ensure that the quantity and duration of the hedge match the company’s exposure and that OTC derivatives are justified for the hedge.
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