DS Kolamkar Panel
RBI is considering proposal of DS Kolamkar Panel, to permit FIIs and Commercial Banks to trade on Indian Commodity Exchanges. DS Panel had deeply studies the functioning of commodity markets. As per the findings, the panel had noticed that participation of banks and FIIs could considerably bring down the inflated costs of transactions in commodity futures. In addition it will also boost the returns of these exchanges which have been approximately halved lately. The latter trend has set in due to commodity transaction tax and tighter trading norms which were implemented after the National Spot Exchange Scam.
The presence of these institutions can be seen in commodity exchanges via proxies although banks have completely been left out due to Banking Regulation Act.
The introduction of big market players in commodity exchanges will infuse more liquidity in the system thus boosting trader sentiment and confidence. It can lead to better prices mainly in internationally trading goods and benefit imports and exports. The viewpoint has also been backed by the Forward Markets Commission.
On the other hand, FIIs have an inherent ability to sway the stock markets due to their large and influential presence may do so with double effect in leaner commodity markets. There is risk of domestic spot prices especially of agricultural commodities getting influenced too. Thus, there has to well-weighed counter-balances in place in terms of effective monitoring and regulation.