According to SEBI’s plan to allow trading of spot gold in various exchange platforms, Electronic Gold Receipts (EGR) will be available for trading in stock exchanges in India. Similar to shares, EGRs will be held in Demat form and can be converted into physical gold when needed.

India is one of the world’s largest consumers of gold having an annual demand of around 900-1,000 tonnes. Although the buying of spot gold is as of now only on the over-the-counter market. In this year’s Budget, the Finance Minister had appointed SEBI as a regulator for spot exchanges. The NSE, BSE, the Multi Commodity Exchange, and National Commodity & Derivatives Exchange are expected to be given permission initially for trading EGRs. According to a SEBI paper put out for public comments, EGR trading will bring a Securities Transaction Tax (STT) and GST from the beginning. A working group on spot gold exchange has recommended that the entire trading should be done in three tranches including the conversion from physical gold to EGRs, trading of EGRs, and again conversion of EGR back to physical gold. An interface will be developed between the vault managers of physical gold, depositories holding EGRs in Demat, and stock exchanges & clearing corporations responsible for clearing the trade. Making the EGR fungible and allowing interoperability between vault managers are being considered.

EGR of 1 kg, 100 gm, and 50 gm denominations will be made available and they can be converted to physical gold. For attracting the retail investors, EGR with smaller denominations of 10 gm and 5 gm will also be traded. The source of supply of the physical gold to be converted into EGR will be the fresh deposit of gold, coming into the vaults, either through imports or through stock exchanges accredited domestic refineries. The existing gold deposit lying in the vaults, which meets the source criteria and has never been out of the vaulting infrastructure, may be transferred to the instant vault for conversion into EGR. The depositor or the owner of the gold planning to convert physical gold into EGR and trade on the exchanges will have to guarantee the delivery of such gold to the vault manager, who will then record relevant information in the common interface and create the EGR. All the other areas of default claims, trading settlement will work as the stock exchange ecosystem.