The National Stock Exchange is likely to introduce trading of electronic gold receipts on its platform and market regulator SEBI is ironing out some taxation issues related to the product with the government, an official said on Thursday.
Referring to the Electronic Gold Receipt (EGR), V S Sundaresan, Executive Director at the Securities and Exchange Board of India (SEBI), said, this product has been introduced by SEBI and BSE has launched it about a month ago, and that "we hope that this product will definitely gain traction over a period of time”.
"Under this product, what is proposed is that the physical gold is to be deposited in a vault, that vault manager will issue an electronic receipt and this will be credited to the demat account of the investor, that receipt can be traded on the stock exchange,” he explained.
So the gold will remain in a vault but it will generate some sort of income and the unutilised gold can be put to productive use, Sundaresan added.
The Bombay Stock Exchange launched EGR trading on its platform.
It introduced two new products of 995 and 999 purity during the Muhurat trading on Diwali. Trading can be done in multiples of 1 gram and deliveries in multiples of 10 gram and 100 gram, the exchange had said in a statement.
"It is a new segment. The BSE has come forward. The NSE is likely to do it shortly. We are working on the proposal,” Sundaresan said.
He said there are some tax related issues which need to be ironed out, adding "We are working with the ministry and we are hoping that this product will make gold trading more transparent and more satisfactory for investors.
We are hoping that this will help the unutilised or the physical gold which is lying idle can be converted into more economically tradable form,” Sundaresan said at an Assocham summit.
The BSE in February received in-principle approval from Sebi, after which the exchange conducted several mock trading in the test environment for its members to facilitate trading in EGRs.
EGRs will cater to all market participants, which means that buyers and sellers on the exchange will include individual investors, as well as commercial participants along the value chain like importers, banks, refiners, bullion traders, jewellery manufacturers and retailers.
Sumita Dawra, secretary in the Department for Promotion of Industry and Internal Trade (DPIIT), said that India accounts for nearly 1/3rd of the world’s gold consumption at 800 tonnes per annum.
Highlighting that India was the world’s second largest importer of gold, Dawra said, "We are hardly mining our own gold. So it is naturally causing a strain on our current account deficit (CAD)”.
Echoing similar sentiments, Sundaresan said India meets 89 percent of its gold demand from imports. In 2022-23 up to June, the country’s gold imports stood at over Rs 81,100 crore, he said.
"This large demand of gold imports has adverse impact on CAD and further implications on the external sector stability,” he added.
(Edited by : Anushka Sharma)
"Under the Electronic gold receipt, it is proposed that physical gold is to be deposited in a vault, the vault manager will issue an electronic receipt which will be credited to the demat account of the investor, that receipt can be traded on the stock exchange,” SEBI executive director said.
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