The National Stock Exchange (NSE) is likely to introduce trading of Electronic Gold Receipt on its platform. The move by the NSE comes about a month after the BSE launched it. According to PTI, markets regulator Sebi is ironing out some taxation issues related to the product with the government.
What Are Electronic Gold Receipts?
Electronic Gold Receipts (EGRs) are instruments representing gold in electronic form. They are notified as securities, with trading, clearing and settlement features similar to other securities that are currently available in India. The BSE is the first exchange in India to launch EGR.
How Do They Work?
Conversion From Physical Gold To EGR: Under this, the physical gold is deposited in a vault. On the receipt of the physical gold, the vault manager will do the validations and create EGR, for which the manager issues an electronic receipt. Thereafter, the EGRs are credited to the demat account of the investor and the receipts can be traded on the stock exchange.
Conversion From EGR To Physical Gold: The owner of the EGR needs to place a request to the depository. The vault manager then executes the conversion of EGR to physical gold. Thereafter, the beneficial owner finally collects the gold from the vault location.
“The trading will be done in three tranches that include conversion from physical gold to EGRs, trading of EGRs, and again conversion of EGR back to physical gold,” the BSE said in a document.
How Can You Buy Electronic Gold Receipts?
For the conversion of physical gold to EGR, the timings are from 10:00 am to 03:00 pm. There is an option of choosing any vault across the country for the conversion. Following the request for deposit and withdrawal, the EGR is credited into demat account at T+1 and physical gold can be collected at T+1, respectively.
On the BSE, the Electronic Gold Receipts are available for trade between 9:00 am and 9:30 pm from Mondays to Fridays. The trades are settled in T+1 days. Trading can be done in multiples of 1 gram and deliveries in multiples of 10 gram and 100 gram.
On the BSE, all trades take place through a nationwide electronic trading platform that can be accessed from terminals located with members of the BSE. Participants can trade through trading members of the BSE. Participants need to open a trading account and demat account with a trading member/ DP.
Investors can also use their existing trading and demat account for investing/ trading in EGR, according to the BSE website.
Can Electronic Gold Receipts Be Used As Collateral?
Yes. EGRs are accepted as collateral with 20 per cent haircut, according to the BSE website.
India meets 89 per cent of its gold demand through imports. In 2022-23 up to June, the country’s gold imports stood at over Rs 81,100 crore. This large demand for gold imports has an adverse impact on CAD and further implications on the external sector stability.
