Like Shares, Hold Commodities in Demat Soon
BSE and commodity bourse MCX to pick 24% stake each in CDSL’s new venture
Mumbai: Soon, you will be able to hold commodities in your demat account, the way you hold shares. Central Depository Services (CDSL) is set to launch the country’s first demat facility for commodity markets. Both the BSE and commodity bourse MCX have agreed to pick 24% stake each in the venture, two officials close to the development said. The CDSL will hold the rest 52% stake in the company that will have a equity capital of Rs 40-Rs50 crore. “CDSL’s new venture will primarily allow warehouse receipts in demat form,” said Cyrus Khambata, CEO, CDSL Ventures and senior VP, CDSL. “This will chiefly benefit farmer and those dealing in agri-commodities.”
Other officials involved with the new venture said that demat services will also be extended to bullions later. While the BSE refused to comment, MCX said it has already received board approval to buy 24% stake in CDSL’s commodity services company.
A warehouse receipt is a proof of ownership of the commodities, including agricultural produce or even metals lying in warehouse. Financing of warehouse receipts is a more than a Rs 30,000 crore business annually in India as per rough estimates and experts say it has the potential to double in the next couple of years. While warehouse owners are known to issue such receipts, the absence of a national-level risk management authority that would take the onus of ascertaining the quantity and quality of goods lying in the warehouse to make the receipts tradable is a concern. Warehouse receipts may be negotiable or non-negotiable. The need for demat services in commodity markets was first felt after the National Spot Exchange (NSEL) fiasco. The main reason for NSEL to go bust was a massive shortfall in commodities lying in the warehouse than traded on the exchange. The issuance of demat receipts by national players like the CDSL would bring in the muchneeded risk management for commodity markets.