The Board of Directors approved the 2021 SEBI Gold Exchange and Vault Managers Regulations, which allow the exchanges to establish a gold exchange in India.
In the framework, the instrument representing gold will be referred to as an electronic gold receipt which will be considered as securities. In addition, these EGRs will have clearing, trading and settlement processes like any other security.
Any recognized exchange, existing or new, can initiate trading of electronic gold receipts in a separate segment, SEBI said in a press release.
SEBI said the denomination for trading the EGR and converting to gold will be decided by the exchange with the approval of the market regulator. In addition, investors will be allowed to hold EGRs for as long as they deem appropriate.
The capital market regulator has also said that EGR will be fungible and interoperability between vault managers will be allowed to reduce the cost of transactions.
“The gold exchange is expected to create a vibrant gold ecosystem commensurate with India’s large share of gold consumption,” said the market regulator.
Under the regulations for safe deposit boxes managers, SEBI has stated that entities wishing to become safe deposit boxes managers should have a net worth of Rs 50 crore or more. In addition, they are expected to be a body incorporated in India and will be regulated by SEBI as an intermediary.
Vault managers will be responsible for accepting deposits, storing and safekeeping gold, creating EGRs, withdrawals, and resolving grievances.
The regulator has also given its approval for the launch of silver exchange traded funds on the gold exchange traded fund lines that are currently offered by mutual funds.