Most retail investors in India have gold in one of two forms, gold Jewellery sitting in a bank locker, or a fund tracking gold prices. Another alternative, the Electronic Gold Receipts (EGRs), offer the best of both worlds. You buy and sell real physical gold, held in regulated vault, on a stock exchange just lie stocks. If you have a demat account, you have all the tools you need to get started.
EGRs are not something imported from overseas, they are a
home-grown market reform. The government of India has
formally notified EGRs as ‘securities’ under the Securities
Contracts (Regulation) Act, 1956 and SEBI has developed a full
regulatory framework around EGRs covering vault managers,
depositories, stock exchanges and clearing corporations.
Trading takes place from Monday to Friday on recognized stock
‘exchanges and settled on a T+1 rolling basis, similar to equity
shares. This is not some sort of a fintech experiment. “it is a
‘government-backed instrument that aims to make ownership of
gold more transparent, more accessible and more useful for the
‘average investor.
India imports roughly 700-800 tones of gold every year: its
households together own an estimated 25,000 tones of
privately held gold, much of it lying idle in lockers. One
rationale for EGR is to bring some of that gold into an
‘organized, efficient market and to give the retail investor a
better deal.
HOW IT WORKS, SIMPLY PUT
The process is easier than it sounds. The physical gold imported
refined by the accredited domestic refineries is deposited with
a SEBI-registered vault manager. The gold must conform to the
LBMA Good Delivery Standard or the India Good Delivery
‘Standard. Once the above quality checks are done, an Electronic
Gold Receipt is created and credited to the demat account of the
depositor.
From then on the EGR can be bought, sold or held on a stock
‘exchange, and redeemed for physical gold whenever the
investor wishes. Withdrawal is built into the system. If you want
your gold back, you place a request through the depository
interface, select your preferred vault location and collection point
Processes the delivery typically on the same working day.
The
framework also allows inter-operability between vault
‘managers, meaning you can deposit gold at one location
and withdraw from a different vault, adding flexibility for investor across cities
For retail Investor
the practical benefits are immediate
Purity has always been a concern when buying gold in India. Under the EGR framework, only gold meeting prescribed international or domestic delivery standards enters the system eliminating ‘uncertainty at the point of entry.
Vault managers are required to carry comprehensive insurance against theft, fire, burglary, fraud and other risks, conduct fortnightly physical verification of stored gold, and maintain daily reconciliation of
physical holdings against ‘electronic records.
Grievance redressal timelines ‘are specified: weight-related complaints must be resolved within one working day, and most other complaints within seven working days. The pricing shift is equally
significant. When gold trades ‘as on EGR on an exchange, it trades at single transparent market price with a daily price ‘band of 10% from the previous closing price.
‘The making charges, location premiums and negotiation dynamics of physical gold transactions largely disappear. ‘Two buyers in different cities, purchasing EGRs at the same moment, pay the same price for the same quality of gold.
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