SEBI's new Framework for Gold Exchange in India - A Walkthrough

In last year’s budget speech, the finance minister had announced that a Gold Exchange would be set up under the supervision of SEBI. This was still at a conceptual stage and SEBI had issued a consultation paper in May 2021 seeking comments.

Now that it is operational, this could potentially lead to more regulated gold-backed savings products, considering the popularity of gold as an investment option among India, keeping aside the need to financialize household savings.

  • The gold exchange would be a national platform for buying and selling EGRs with underlying standardized gold in India. EGRs will be issued against physical gold. Investors can trade in EGRs on existing stock exchanges as well as the proposed gold exchange, according to the Sebi framework.

  • The Circular comes into force with immediate effect

  • The entire transaction in a gold exchange has been divided into three tranches — conversion of physical gold into EGR, trading of EGR on stock exchange/s and conversion of EGR into physical gold.

  • Sebi would regulate the entire ecosystem of the proposed gold exchange and would be the sole regulator for gold exchange, including vaulting, assaying, gold quality and delivery standards.

  • An EGR created will not be linked with a unique bar reference number of the physical gold. Moreover, physical gold deposited at one location can be withdrawn from a different location of the same or different vault manager.

  • In the previous format, transactions of gold outside the recognized vaulting loop were primarily based on bilateral agreements and on trust basis.

  • Clearing Corporations have been tasked with empanelling agencies for checking the purity of gold. However, the charges towards assaying, transportation and assaying charges, would be borne by the beneficial owner.

  • Stock exchanges meanwhile have been allowed to launch contracts with different denominations for trading and/or conversion of EGR into gold.

You can read the entire framework in the circular recently uploaded on SEBI’s website here :

We had the chance to do a Zerodha Educate episode with Mr. Chirag Mehta - Senior Fund Manager at Quantum Mutual Fund. Sharing the link just in case you would want to learn more about this Asset Class.

Please post any personal views, opinions and discussions below. We would love to know what you think about it. Thanks :slight_smile: