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Electronic receipts to ease commodity trade

Mumbai, Nov. 26: Even as a slew of electronic commodity exchanges is being set up in the country, representatives from foreign commodity exchanges are flocking here to tap the fast emerging opportunities.

Dubai Metals and Commodities Centre executive director David Rutledge, who was in town recently, said, “Dubai is a point of consumption like Singapore and not a centre of production like India.”

Rutledge scouted for synergies even as the Indian electronic commodity exchanges have started to get organised. Last week, a commodity exchange, promoted by Financial Technologies and a couple of commodity associations, was activated by Mukesh Ambani. The Bombay Stock Exchange and National Stock Exchange are also promoting commodity exchanges.

However, Rutledge was here to sell a new concept called electronic commodity receipt. The new Dubai Commodity Receipts (DCR) system is a major step forward to ease trades in commodities. “Warehouse receipt is the basic document for commodity trade finance. Using this receipt, a borrower can prove to a bank that he holds a commodity of a certain type and quality in a warehouse,” Rutledge said.

“On the basis of the document and the soundness of the borrower, the bank provides financial assistance,” he added. “In case the warehouse receipt is negotiable, transferring the document can transfer the ownership of the physical goods from one person to another,” he said.

This innovative scheme developed by Dubai Metals will be operational in early 2004. It brings Dubai on par with the US, which is also in the process of migrating to electronic warehouse receipts after nearly a century of paper transactions.

With ICICI Bank and IndusInd Bank setting up representative offices in Dubai in September, it is expected that these banks will cater to the needs of the commodity trade by Indian expatriates.

Rutledge expects the electronic receipt system will provide the much-needed fillip to commodity trade between UAE and India.

Approved warehouses will issue the electronic receipts for inbound deliveries of bulk commodities. The warehouses will issue these receipts on a Dubai Metals-controlled highly secure website.

Once the commodity has been delivered and an electronic receipt issued, any banking member of the system can be approached to obtain finance. These receipts will enable the traders to conduct business through the Net easily.

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