Sebi Unifies Bullion Vaulting Norms for ETFs & Derivatives
By Market Desk
Sebi proposes unified vaulting regulations for physical bullion in ETFs and derivatives, enhancing investor protection and market transparency in India.
The Securities and Exchange Board of India (Sebi) has proposed expanding its Vault Managers Regulations, 2021, to encompass physical bullion underlying all Sebi-regulated products. This move extends beyond Electronic Gold Receipts (EGRs) to include instruments like exchange-traded funds (ETFs) and bullion derivatives.
Why a Unified Framework Matters
This initiative aims to establish a common regulatory framework for vaulting services across various bullion-related instruments. Sebi seeks to strengthen investor protection, enhance operational resilience, improve transparency, ensure auditability, and bolster regulatory supervision.
Sebi’s proposed amendments will introduce or revise definitions and modify existing provisions for vaulting operations. These changes will ensure consistent standards, regardless of the financial product storing the bullion.
The regulator intends to replace EGR-specific provisions with more product-neutral requirements. This includes updates to definitions and standards governing vaulting services and bullion itself.
New Consolidated Circular on the Horizon
In conjunction with these regulatory adjustments, Sebi plans to issue a new consolidated circular. This document will outline the framework and modalities for Electronic Gold Receipts and provide operating guidelines for vaulting services across all Sebi-specified bullion-related instruments.
The circular aims to harmonize instrument-specific procedures while maintaining common minimum standards for bullion custody. Key areas covered will include the deposit, storage, transfer, and withdrawal of bullion.
It will also address critical aspects such as reporting, reconciliation, audit, security, business continuity, insurance, and grievance redressal mechanisms.
Responding to Market Growth
This comprehensive review directly responds to the increasing growth observed in physically backed precious metal products. The regulator noted a rising volume of physical gold and silver held in custody for investors.
Sebi emphasized that a unified framework is crucial for ensuring consistent standards across various operational facets. These include vault infrastructure, governance, operational controls, purity verification, insurance, cyber security, business continuity, audit, and overall risk management. The implications are clear: a more robust and standardized environment for investors holding bullion-backed products in India’s financial markets.