IFSCA Bullion Market Regulations, 2025: A Detailed Analysis

The IFSCA Bullion Market Regulations, 2025 establish a legal and regulatory framework for trading gold, silver, and other precious metals in India’s International Financial Services Centres ( IFSCs ). The International Financial Services Centres Authority ( IFSCA ) governs the bullion exchanges, clearing corporations, depositories, and vault managers operating within the IFSC.

The IFSCA Bullion Market Regulations, 2025, were introduced to create a well-regulated, transparent, and efficient bullion market in India’s International Financial Services Centres ( IFSCs ). Before these regulations, bullion trading in India faced challenges such as a lack of a structured market, inconsistent quality standards, and limited international participation. This Act provides a clear legal framework for trading gold, silver, and other precious metals, ensuring that transactions are secure, well-documented, and properly settled.

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CHAPTER I: PRELIMINARY

Short Title and Commencement

• These regulations are called the International Financial Services Centres Authority (Bullion Market) Regulations, 2025.
• They come into effect on the date of their notification in the Official Gazette.

Definitions

• Bullion – Includes gold, silver, or other precious metals in the form of bars or unallocated bullion that meet the required good delivery standards for quality, weight, and purity.
• Bullion Exchange – A recognized marketplace where the buying, selling, and trading of bullion and bullion-related contracts (such as bullion depository receipts and derivatives) take place.
• Bullion Depository Receipt (BDR) – A receipt issued by a bullion depository, representing ownership of physical bullion stored in a vault. These receipts can be traded on a bullion exchange.
• Vault Manager – A registered entity responsible for storing and managing bullion in secure vaults. Vault managers ensure the safe custody and insurance of bullion stored on behalf of depositors.
• Bullion Clearing Corporation – An entity that clears and settles trades on a bullion exchange, ensuring that transactions are properly executed and reducing counterparty risk.

CHAPTER II – Recognition of Bullion Exchange and Bullion Clearing Corporation

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Application Process:

• Any company that wants to become a bullion exchange or clearing corporation must apply to IFSCA.
• It must provide detailed documentation, including:
  • Memorandum and Articles of Association.
  • Bye-laws and governance structure.
  • Rules for membership, trading, and settlement.

Requirements for Bullion Exchange Recognition:

• The applicant must be a company limited by shares.
• It must be demutualized, meaning that ownership and management are separate from trading rights.
• It must have an online trading system with real-time market monitoring.
• A dispute resolution and grievance redressal system must be in place.
• The exchange must ensure secure and fair trading practices.

Requirements for Bullion Clearing Corporation Recognition:

• The entity must have risk management mechanisms in place.
• It should offer settlement guarantees through netting and novation.
• The corporation must ensure seamless clearing and settlement of bullion trades.
• Adequate infrastructure for the settlement of transactions is required.

CHAPTER III – Operations of Bullion Exchange

Clearing and Settlement of Trades

• Every bullion exchange must use a bullion clearing corporation for settlement.
• A written agreement must be in place between the exchange and clearing corporation to define:
  • Trade settlement conditions.
  • Risk management strategies.
  • Settlement fees and other terms.

Regulatory Responsibilities of Bullion Exchanges

1. Protect investors and traders by ensuring fair practices.
2. Regulate bullion contracts and related financial instruments.
3. Prevent fraud and market manipulation.
4. Monitor trading activities and enforce compliance.
5. Maintain high-quality delivery standards.

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Chapter V – Net Worth Requirements for Bullion Exchange and Bullion Clearing Corporation

Financial stability is key to ensuring trust in bullion markets. This chapter defines the minimum financial requirements for bullion exchanges and clearing corporations.

1. Minimum Net Worth: Bullion Exchange: At least USD 10 million at all times. Bullion Clearing Corporation: At least USD 10 million at all times.
2. Additional Net Worth Requirements: If necessary for risk management, IFSCA may require a higher net worth. The decision depends on the nature and scale of business operations.
3. Profit Distribution Restriction: A bullion exchange or clearing corporation cannot distribute profits to shareholders until the required minimum net worth is achieved.
4. Annual Net Worth Certification: Each entity must submit an audited net worth certificate for the previous financial year to IFSCA by September 30th of each year.

Chapter VI – Ownership Structure of Bullion Exchange and Bullion Clearing Corporation

This chapter ensures proper control and governance over bullion exchanges and clearing corporations by restricting who can own them.

1. Who Can Own a Bullion Exchange? A recognized bullion exchange or stock exchange (Indian or foreign) must hold at least 26% of the paid-up equity share capital. A joint venture of financial market institutions must hold at least 51% of the paid-up equity share capital.

2. Who Can Own a Bullion Clearing Corporation? A recognized bullion exchange, stock exchange, or clearing corporation (Indian or foreign) must hold at least 26% of the paid-up equity share capital. A joint venture of market institutions must hold at least 51% of the paid-up equity share capital.

3. Foreign & Domestic Ownership Limits: Any other person or entity (Indian or foreign) cannot hold more than 25% of a bullion exchange or clearing corporation. This ensures majority ownership remains with financial market institutions.

4. Approval for Large Shareholding: Anyone wanting to acquire more than 5% of shares must get IFSCA’s prior approval. This prevents hostile takeovers and market manipulation.

5. Quarterly Shareholding Disclosure: Exchanges and clearing corporations must report their shareholding pattern to IFSCA every quarter. They must disclose the top 10 shareholders and any new acquisitions.

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Chapter VIII – Compliance, Monitoring, and Enforcement

To maintain a secure and transparent market, IFSCA has the power to monitor, audit, and enforce regulations.

1. Inspection & Audit: IFSCA can inspect and audit bullion exchanges, clearing corporations, depositories, and vaults at any time.

2. Information & Disclosure Requirements: All entities must submit regular reports on their financials, shareholding, and compliance with regulations.

3. Enforcement Actions: If an entity violates the regulations, IFSCA can:

• Issue warnings or penalties.
• Suspend or cancel licenses.
• Take legal action for serious violations.

Chapter IX – Consumer Protection & Dispute Resolution

Since bullion trading involves large financial transactions, this chapter focuses on protecting investors and traders from fraud and disputes.

1. Grievance Redressal Mechanism:  Bullion exchanges and clearing corporations must have a proper system for handling consumer complaints.

2. Dispute Resolution System: Investors can file disputes through an arbitration process managed by the bullion exchange.

3. Transparency Requirements: Exchanges must publish real-time market data so that investors can make informed decisions.

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