BTL 880 - Commodity Market

 

The Banking Tutor’s Lessons

BTL 880                                                                                18-03-2026

Commodity Market

A Commodity Market is a marketplace for buying and selling raw materials or primary products like gold, oil, wheat, and coffee, traded physically or via derivatives (futures, options, ETFs) on exchanges like MCX and NCDEX, allowing investors to diversify and hedge against inflation and risk.

These markets facilitate price discovery and risk management for essential goods, with categories including energy, metals, agriculture, and livestock.  

Key Aspects

What's Traded: Physical goods (crude oil, gold, natural gas, grains, spices) and their derivatives (futures, options).

Categories: Energy (crude oil, natural gas), Metals (gold, silver, copper), Agriculture (wheat, corn, sugar, cotton), Livestock & Meat.

How to Invest: Directly buying the commodity, trading futures/options contracts, or buying commodity-focused Exchange Traded Funds (ETFs) or stocks.

Purpose: Portfolio diversification, hedging against inflation, managing price volatility, and speculation.

Major Exchanges (India): MCX (Multi Commodity Exchange) for metals, energy, etc., and NCDEX (National Commodity & Derivatives Exchange) for agricultural commodities. 

Working of Commodity Market

Standardization: Commodities are standardized (e.g., specific grade of gold, weight of wheat) for easy trading.

Exchanges: Trades happen on regulated exchanges (like MCX, NCDEX).

Contracts: Futures contracts lock in a price for future delivery, crucial for producers and consumers.

Participants: Producers, consumers (hedgers), speculators, and investors.

Benefits for Investors

Inflation Hedge: Commodities often perform well during inflationary periods.

Diversification: Reduces overall portfolio risk.

Global Exposure: Access to international markets and geopolitical events.

Investment & Hedging: It offers a way for investors to diversify their portfolios and provides a potential hedge against high inflation.

Volatility: Commodity markets are generally considered more volatile and riskier than stock markets due to price swings heavily influenced by supply and demand, geopolitical situations, and weather conditions.

Trading Instruments: The most popular and convenient way to invest in commodities is through futures contracts, which obligate parties to trade a commodity at a predetermined price and date.

Sekhar Pariti

+91 9440641014

DBC 2377 - Buyout

 

The Banking Tutor 

Daily Banking Concept -  2377 

Buyout 

A buyout is the acquisition of a controlling interest in a company and is used synonymously with the term acquisition.

DBC 2376 - Letter of Comfort

 

The Banking Tutor

 

Daily Banking Concept -  2376

 

Letter of Comfort

 

A letter of comfort is a non-legally binding document issued by one party (often a parent company) to provide assurance  to another party (like a lender) that a borrower will meet its  obligations.

DBC 2375 - Option-Adjusted Spread (OAS)

 

The Banking Tutor 

Daily Banking Concept -  2375

Option-Adjusted Spread (OAS) 

The option-adjusted spread (OAS) measures the spread between a bond's rate and the risk-free rate, while adjusting for any embedded options like callables or mortgage-backed securities.

BTL 879 - CGTMSE - Modification in CGS – Term Loans

 

The Banking Tutor’s Lessons

BTL 879                                                                                15-03-2026

CGTMSE - Modification in CGS – Term Loans

Extension of Guarantee Expiry Period for Term Loan Accounts to ensure eligibility at the time of NPA recognition

CGTMSE vide Circular dated 31^st Dec 2025, advised the following in respect of Guarantee cover to Term Loans.

As per extant Guidelines, Annual Guarantee Fee (AGF) is charged up to the guarantee expiry date or closure of the account, whichever is earlier.

Further, the guarantee should be in force at the time the account turns NPA, which implies that the account must be within the guarantee expiry date on the NPA date for claim eligibility.

In certain cases, especially where borrowers default on the last instalment(s), the account becomes NPA after the original guarantee expiry date, rendering such accounts ineligible for guarantee claims.

For example, in respect of a loan sanctioned on April 01, 2025 with a 5-year tenure, the guarantee will expire on March 31, 2030. If the borrower defaults in the last instalment(s), the account would turn NPA during April-June 2030, i.e., after the guarantee expiry date, leading to claim ineligibility.

To avoid such instances and ensure seamless coverage at the time of NPA recognition, it has been decided as under:

For cases where guarantee is issued after the date of this Circular:

The guarantee expiry date for term loan accounts shall be original expiry date + four (4) months.

For all existing live and standard guarantee accounts:

The guarantee expiry date shall be extended by four (4) months uniformly for all live and standard CGPANs (NPA not marked in CGTMSE portal) except for cases expiring in current FY i.e. 2025 -26. The cases whose guarantee expires in the current financial year (FY 2025–26), the guarantee expiry date will remain unchanged, as the guarantee fee for FY 2025–26 has already been paid.

AGF shall be charged for the extended guarantee period [i.e., original expiry date + four(4) months] for both future cases as mentioned at Sr no. 1 and existing live and standard cases as mentioned at Sr no. 2.

Sekhar Pariti

+91 9440641014

DBC 2374 - Cryptocurrency

 

The Banking Tutor 

Daily Banking Concept -  2374 

Cryptocurrency 

Cryptocurrencies are digital assets created using blockchain technology.

DBC 2373 - Muhurat Trading

 

The Banking Tutor 

Daily Banking Concept -  2373 

Muhurat Trading 

Muhurat trading is the trading activity in the Indian stock  market on the occasion of Diwali (Deepawali). Usually, it is  held during evening hour and is announced by the stock  market exchanges notifying traders and investors of the non-scheduled trading hour.