Source money control
NEW DELHI — The Securities and Exchange Board of India (SEBI) is set to undertake a comprehensive review of the Electronic Gold Receipt (EGR) framework, aiming to address persistent operational hurdles and position the instrument as India’s primary benchmark for gold price discovery.
Speaking at an industry event organized by the Commodity & Capital Participants Association of India (CPAI) on Saturday, SEBI Chairman Tuhin Kanta Pandey acknowledged that while EGRs were designed to create a transparent, regulated spot market for gold, the segment has yet to gain the “desired traction” among investors and market participants.
Addressing the “GST Friction”
A primary focus of the upcoming review will be the taxation structure. Currently, the movement of gold from the physical to the electronic ecosystem—and back—faces complexities under the Goods and Services Tax (GST) regime.
“There are several GST-related challenges that need to be addressed. We will have to work closely with the GST Council Secretariat to resolve these critical issues to truly spur the development of commodity markets,” Pandey stated. Market experts have long argued that the lack of a seamless GST credit flow for EGR transactions acts as a deterrent, keeping liquidity low compared to the traditional physical market.
Strengthening the Ecosystem
Beyond taxation, SEBI has formed dedicated working groups to examine structural reforms within the non-agricultural derivatives space. The goal is to optimize:
Margins and Position Limits: Ensuring they are attractive for traders without compromising market integrity.
Delivery and Settlement Mechanisms: Streamlining the process where physical gold is converted into EGRs via registered vault managers.
Interoperability: Enhancing the ability of investors to trade and settle across different exchanges and vaulting locations.
A Warning Against “Unregulated” Gold
The push for EGRs comes amid a broader crackdown on unregulated “Digital Gold” platforms. SEBI recently issued a stern advisory warning investors that online platforms offering digital gold do not fall under its regulatory ambit, leaving consumers without formal grievance redressal mechanisms like the SCORES platform.
“I urge the industry to educate participants and investors to deal only in regulated gold products,” the SEBI chief added, highlighting that EGRs, Gold ETFs, and commodity derivatives offer the highest level of investor protection.
The Vision: “One Nation, One Price”
India is one of the world’s largest consumers of gold, yet it remains a “price taker,” largely following international rates set in London or New York. By revitalizing the EGR framework, SEBI intends to create a robust domestic “spot” exchange where local supply and demand dynamics determine the price.
If successful, the EGR segment could become the gold standard for pricing in India, providing a transparent “one nation, one price” benchmark that benefits jewelers, investors, and the broader economy alike.
