Markets regulator Sebi plans to allow custodial services in the commodity derivatives market to enable institutional participation.
The proposal is likely to be discussed at Securities and Exchange Board of India's (Sebi) board meeting on Wednesday, officials said.
Under the proposal, existing custodians will be permitted to add commodities as an asset class and provide physical delivery of both securities and commodities, they added.
Current, regulation on custodian of securities provide for safekeeping of securities or gold or gold related instruments or title deeds of real estate and services incidental but do not provide for safekeeping of goods, which are underlying assets of commodity derivatives.
To enable participation of institutional investors in commodity derivatives market, it has been proposed to make necessary amendments in the custodian regulations so as to provide for requisite custodial services.
It has also been proposed that responsibility of custodians will not be limited to holding of securities but would also include holding of goods.
The proposal is aimed at enabling participation of institutional investors such as mutual funds and portfolio managers in the commodity derivatives market.
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