India’s markets regulator, the Securities and Exchange Board of India (SEBI), has proposed widening the existing regulatory framework for vault managers to include physical bullion backing a broader range of SEBI-regulated products. The proposal covers gold and silver ETFs, bullion derivatives and other bullion-related instruments specified by the regulator.
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The proposal forms part of SEBI’s review and expansion of the SEBI (Vault Managers) Regulations, 2021. The objective is to create a harmonised vaulting framework covering physical gold, silver and other precious metals held as underlying assets for regulated financial products.
Under the proposed framework, vault managers would be responsible for bullion linked to Electronic Gold Receipts (EGRs), bullion ETFs, bullion derivatives and any other bullion-related instruments notified by SEBI.
At present, the vault manager framework mainly applies to physical gold backing EGRs traded on recognised stock exchanges. Vault managers receive, store and safeguard the physical gold and support the creation and extinguishment of EGRs.
The 2021 regulations already establish requirements covering registration, governance, net worth, risk management, internal controls, insurance, record keeping, reconciliation, audits, grievance redressal and business continuity. SEBI now wants to extend these safeguards to a wider set of financial products involving physical precious metals.
Why SEBI Wants Common Vaulting Rules
SEBI said the existing framework provides a strong foundation that can be expanded to cover additional products requiring secure custody of physical bullion.
“Given the rapid growth of physically backed precious metal products and the increasing concentration of investor assets in a limited number of vaults, extending the Vault Manager regulatory framework to cover storage of gold, silver and other precious metals underlying ETFs and derivatives on such bullion would mitigate operational risks, ensure regulatory consistency across similar custody activities and strengthen investor protection in the Indian securities market,” SEBI said.
The regulator has therefore proposed “a harmonised vaulting regime applicable to all physical bullion, including gold, silver and such precious metals, which are the underlying of Sebi-regulated products and are held pursuant to Sebi regulatory requirements”.
The proposed regime would introduce consistent requirements for vault infrastructure, governance, eligibility, operational controls, purity verification, insurance, cybersecurity, business continuity, auditing, inspection, record maintenance and risk management.
According to SEBI, common standards would also make regulatory supervision more effective and provide greater confidence to investors holding bullion through regulated financial products.
“It would also facilitate effective supervision by Sebi, and enhance investor confidence by ensuring that all investor-owned bullion held for Sebi-regulated products are subject to a common and robust regulatory framework, irrespective of the product through which such exposure is obtained,” it said.
Gold and Silver Markets Have Expanded
SEBI noted that India’s bullion market has undergone substantial changes with the expansion of products such as gold ETFs, silver ETFs and bullion-backed derivatives.
India remains one of the world’s largest gold-consuming markets, while electronic gold products have expanded as investors increasingly look for alternatives to directly holding physical bullion. The proposed changes are intended to ensure that the physical metal supporting these financial products is governed by consistent custody standards.
The consultation paper also proposes a circular outlining the framework for EGRs and operational guidelines for vaulting services covering bullion-related instruments specified by SEBI.
Public Comments Invited Until September 1
SEBI has invited stakeholders and members of the public to submit comments on the consultation paper and proposed regulatory changes until September 1.
If implemented, the expanded framework would bring physical bullion held against different SEBI-regulated products under a common set of standards, potentially strengthening operational safeguards, transparency and investor protection across India’s growing bullion market.
FAQs
1. What has SEBI proposed for gold and silver vaults?
SEBI has proposed expanding the existing Vault Managers Regulations, 2021, so they cover physical gold, silver and other precious metals underlying a wider range of SEBI-regulated products, including ETFs and bullion derivatives.
2. Which products could come under the expanded vaulting framework?
The proposed framework would cover physical bullion backing Electronic Gold Receipts, bullion ETFs, bullion derivatives and any other bullion-related instruments that SEBI may specify.
3. What is the current role of vault managers under SEBI rules?
Under the existing framework, vault managers primarily store and safeguard physical gold underlying EGRs traded on recognised stock exchanges. They also facilitate the creation and extinguishment of EGRs.
4. Why does SEBI want a harmonised vaulting regime?
SEBI believes common standards could reduce operational risks and create consistency in areas such as vault infrastructure, purity verification, insurance, cybersecurity, audits, record keeping and risk management. The framework is also intended to strengthen investor protection and confidence.
5. Until when can stakeholders submit comments on SEBI’s proposal?
SEBI has invited public comments on the consultation paper and proposed changes until September 1, 2026. Stakeholders can provide feedback before the regulator considers further action on the proposed framework.
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