Electronic Gold Receipts (EGRs)

Prelims:

Indian Economy

Mains:

GS Paper III-Indian Economy

Current relevance:

The National Stock Exchange (NSE) introduced Electronic Gold Receipts (EGRs) as a new exchange-traded segment in May 2026.

 Highlights:

About Electronic Gold Receipts (EGRs):

1.      Electronic Gold Receipts (EGRs) are exchange-traded securities representing ownership of physical gold of specified purity stored in SEBI-regulated vaults.

2.      They are held electronically in a demat account and can be traded on stock exchanges.

3.      Investors can convert EGRs into physical gold through a prescribed redemption process.

Evolution of Electronic Gold Receipts (EGRs):

1.      SEBI approved the regulatory framework for the Gold Exchange and notified the SEBI (Vault Managers) Regulations, 2021.

2.      The Central Government notified Electronic Gold Receipts (EGRs) as securities under the Securities Contracts (Regulation) Act, 1956.

3.      SEBI introduced a Comprehensive Risk Management Framework for EGRs in 2022.

4.      The Bombay Stock Exchange (BSE) launched India's first EGR segment in  2022, followed by the National Stock Exchange (NSE) in 2026.

5.      Initially, BSE introduced EGRs backed by 995 and 999 purity gold, with trading in multiples of 1 gram and physical redemption in 10-gram and 100-gram units.

Working mechanism:

1.      Physical gold deposited in SEBI-regulated vaults is converted into equivalent Electronic Gold Receipts (EGRs), which are credited to investors' demat accounts.

2.      EGRs can be traded through registered stockbrokers on stock exchanges and redeemed for physical gold through the prescribed process whenever required.

Advantages of EGRs:

1.      Ensures the purity and authenticity of gold while eliminating the need for personal storage.

2.      Facilitates transparent and uniform price discovery through exchange-based trading.

3.      Offers high liquidity with a secure and guaranteed settlement mechanism.

4.      Provides investors the flexibility to convert electronic holdings into physical gold through a prescribed process.

5.      Enables portfolio diversification by adding gold as a regulated investment asset.

6.      Promotes a transparent, standardised, and efficient gold trading ecosystem in India.

Source: THE HINDU - https://www.thehindu.com/business/electronic-gold-receipts-a-new-way-to-own-gold/article71242289.ece