Easy credit feeding speculative trade in commodities: FMC

At a time when business and industry across the country are demanding easier credit facilities to pump-prime a sagging economy, commodity market regulator Forward Markets Commission (FMC) has suggested a review of the easy credit policy followed by banks and other financial institutions for trading in commodities, in a bid to curb speculation.

The commodity market regulator made this suggestion in its final report on 'Analysis of price movement and trading in guar complex,' submitted to the consumer affairs ministry.

Besides, FMC has made various other suggestions to keep speculators away from guar trading.

FMC, which had gone into the volatile price movements in guar gum, an important source of foreign exchange for the country, had in May come out with an initial report on guar futures trade during February-March 2012 highlighting irregularities in guar futures trade.

While the FMC said easy availability of bank credit is necessary for processors, regular exporters, the regulator said it had also found active involvement of some entities in the sharp rally during the period.

"FMC has recommended that availability of easy finance is a prerequisite for processors, exporters and other value chain participants, but the financing for purely commodity trading needs to be curbed," a senior government official said.