SEBI likely to allow mutual funds to trade in commodities soon

With an aim to deepen the nascent commodity market, SEBI is likely to give mutual funds the go-ahead to trade in commodity markets in a month, while the regulator is also in talks with the RBI to allow institutional investors like banks and Foregin Portfolio Investors to trade in the segment.

“Mutual funds’ participation in commodities derivatives would be the first one to happen among institutional investors,” Securities and Exchange Board of India Chairman UK Sinha said on Friday, and hinted that the move could be implemented in a month.

Sinha, whose term as SEBI Chairman ends on March 1, was speaking to reporters on the sidelines of the regulator’s international conference on commodity derivatives.

On allowing participation of banks, alternative investment funds and foreign portfolio investors (FPIs) in commodities, he said SEBI is in active consultation with the Reserve Bank over the issue.

“Our argument with RBI has been, in any case bank’s have huge exposure to commodities through the lending programme.

We have been asking them to disclose that. Let a beginning be made by the corporates in disclosing that and then you yourself discover there is a need to allow them to hedge also,” Sinha said.

“We are at an early stage of dialogue and part of the reason is how comfortable RBI is about the financial health of the bank, so they will also have this as a concern when they take that call,” he added.

SEBI, which started regulating commodity markets after the merger of Forward Markets Commission (FMC) with the regulator in September 2015, is working towards developing the commodities market by bringing in more products participants like FPIs, insurance and mutual funds.