Participation of banks, mutual funds and FIIs in commodity trading and futures could be a reality if commodity market regulator Forward Market Commission has its way.
FMC chairman S Sundareshan, while delivering a lecture on 'Commodity Future in India,' strongly advocated the participation of the crucial financial sector in commodities.
"It is very important for the growth of commodity market in India," he said in Ludhiana.
FMC and many financial institutions have all been recommending to allow FIIs to participate only in bullion, metal and crude commodities as a first step. Sundaresan added that banks should be permitted in agriculture commodities.
Since the trading world over is on speculation, delivery mechanism -- which many analysts pointed as poor and cited as the reason for inflationary rise -- is less than two percent globally.
FMC chairman said, "The main purpose of forward trading was price discovery of a particular product at a given point of time."