FMC will be made an independent entity by amending the Forward Contract (Regulation) Act, consumer affairs secretary Labanyendu Mansingh said.

"We have decided not to merge the FMC with Sebi. There will be an independent regulator to keep an eye on commodity futures," Mansingh said.

The FMC, currently under the consumer affairs ministry, will be made an independent entity with more teeth and a steady stream of revenue.

"The FMC will be made an independent regulator like Sebi," he said. The government will soon seek approval from the Cabinet to revamp the 52-year-old Forward Contract (Regulation) Act, Mansingh added.

After getting the go-ahead from the Cabinet, a bill will be moved in the winter session of parliament to overhaul the antiquated act.

The bill to overhaul the FCRA will empower the market regulator, making it an independent body with its own revenues, he said. The FMC currently depends on the government for financial support.

The FCRA revamp will address issues like entry of banks, mutual funds, and financial institutions into futures, and the launch of options in commodities.

The government had allowed commodity futures three years ago with the FMC as the market regulator. However, banks and financial institutions have not been allowed to take part in commodity futures, which has been growing by leaps and bounds since trading was launched.

The total volume of trade on the commodity exchanges has shot up to Rs 7.8 trillion during April-September compared with 5.71 trillion rupees in 2004-05 (April-March), said FMC chairman S Sundareshan.

About 90 per cent of the volumes are generated by the three national commodity exchanges-the Multi Commodity Exchange, the National Commodity and Derivatives Exchange and the National Multi Commodity Exchange of India.

With the stupendous growth in commodity futures, a number of players in the trade, including the commodity exchanges, have been clamouring for the entry of banks, mutual funds, and financial institutions.

Commodity exchanges are of the view that state-owned banks can leverage on their presence all across the country, which in turn could improve credit flow to farmers.

However, the FMC chairman feels a well-oiled regulatory system has to be put in place before allowing mutual funds and financial institutions to invest in a relatively new market like commodity futures.

The FMC had also appointed a committee to evaluate the entry of mutual funds and financial institutions. The panel has recently submitted its report.

"The bill to revamp the FCRA will address these issues in detail, but we are extremely cautious in maintaining transparency in commodity futures to ward-off any kind of market manipulation," Mansingh said.

Strict vigilance is being maintained as any aberrations could hamper growth of trading in commodities-which has a tremendous potential, he added.