Banks gear up for agri trading

With the Union Budget just a few days away, nationalised banks are gearing up for agri commodities foray, anticipating amendments in banking regulations.

State Bank of India, Union Bank of India, Corporation Bank and several others are learnt to have started training their executives for the foray, sources said.

"Our training is going on as we are expecting some amendment in the banking regulations in the coming Budget. Almost all banks are in some degree of readiness for the approval," an SBI official said.

The sources said that since last year, plans were on to allow banks to trade in commodities. Once the government approves of it then the RBI will bring in the necessary amendments in Sections 6 & 8.

A spokesperson of RBI said, "We have referred the matter to the government. At present, it is nebulous."

The Reserve Bank of India looks into several aspects of the bank before giving its nod such as the balance sheet risk, their expertise and capital adequacy ratio, in addition to infrastructure and the possibility of speculative elements in such trading.

Another senior official from Corporation Bank echoed the same view: "Our commodity desk is already in place. It is a non-interest based income for the bank and it also helps in enlarging our clientele base."

The entry of banks is expected to give a big boost to commodity futures trading, officials said.

Currently, Section 6 of the Banking Regulation Act lists the businesses that banks can engage in, while Section 8 deals with businesses that banks cannot enter into.

Section 8 notes that "no banking company shall directly or indirectly deal in the buying or selling or battering of goods, except in connection with the realisation of security given to or held by it, or engage in any trade, or buy, sell or barter goods for others otherwise than in connection with bills of exchange received for collection or negotiation.