What Are Electronic Gold Receipts?

Gold has always had a special place in India. Not only is it a trusted asset to preserve wealth, it’s deeply related to the country’s cultural tradition. But owning physical gold comes with its own set of challenges. Investors often have to worry about safe storage, purity, making charges, and the risk of losing value while selling it back to jewellers.

To address these concerns, many investors have moved to paper gold like gold exchange-traded funds (ETFs). Another way of investing in gold is through electronic gold receipts (EGRs) that are traded on the stock exchanges. The National Stock Exchange (NSE) launched this trading segment on May 4, while BSE has been trading EGRs since 2022.

How Do EGRs Work?

• EGRs are dematerialised securities backed by physical gold. The gold is verified for purity, and stored in vaults approved by the Securities and Exchange Board of India (Sebi).

• Once you buy EGRs, physical gold equivalent to the value of your investment is deposited. The electronic receipts are credited to your demat account and can be bought and sold on the stock exchange like shares.

• Since every EGR is backed by physical gold, its value remains linked to the underlying value of the metal.

• There are three primary Sebi-registered vault managers handling EGRs in India—Sequel Logistics, Brinks India, and Malca-Amit JK Logistics. They levy charges for storage, deposit and withdrawal transactions as well as delivery and transit services.

What Are their Key Features?

• One of the key features of EGRs is that they combine the security of physical gold with the convenience of digital trading.

• Unlike jewellery or coins, investors do not need to worry about storage, purity verification or theft. The gold is already tested and securely stored in regulated vaults.

• EGRs allow you to buy and trade gold in smaller quantities, making participation easier, especially since gold prices are at high levels currently.

• Investors can convert EGRs back into physical gold and take delivery through the authorised vaulting system if required.

• You can withdraw physical gold against your EGRs from any of the different locations of the three Sebi-registered vault managers.

How Do They Compare With Gold ETFs?

• EGRs give investors direct ownership of physical gold stored in Sebi-regulated vaults; gold ETFs are mutual fund units backed by gold held by asset management companies.

• EGRs can be converted into physical gold through authorised vaults. Gold ETFs usually do not allow retail investors to take physical delivery of gold. They get the value of the units invested.

• Gold ETFs charge annual expense of 0.3-0.7 per cent. For EGRs, investors have to pay storage charge (Rs 15 per kg per day), deposit and withdrawal charges (Rs 500 per order), and delivery costs (Rs 500-1,500 per kg per day, which varies from vault provider and location).

• For both ETFs and EGRs, gains within 12 months are taxed as per slab rate, while long-term gains are taxed at 12.50 per cent.