The National Stock Exchange is set to launch a pilot program on October 15 to boost electronic gold receipts (EGRs), which have seen minimal trading since their launch in May. According to reports from Business Standard, the exchange plans to increase the number of authorised collection centres to more than 1,000 over the next year, starting with a pilot at one or two centres for one to two weeks. As reported by NSE's chief business development officer Sriram Krishnan, the plan involves rolling out across 50-100 centres initially, with the goal of reaching few thousand centres across cities within another year. Under the pilot program, people will be able to create EGRs by submitting their gold at authorised collection centres and trade them through their demat accounts on the NSE EGR segment, with the pilot app going live on October 15.
To widen adoption, NSE plans to offer six denominations of EGRs on its platform — 10mg, 100mg, 1 gram, 10 gram, 100 gram, and 1 kg in two types of purity. According to reports from Business Standard, smaller denominations are expected to improve margins and encourage wider retail participation. EGRs are dematerialised securities representing ownership of physical gold securely stored in vaults accredited by the market regulator and held electronically through depositories. Each EGR is backed by physical gold and is tradable on the exchange. The exchange will also launch an app allowing retail traders and investors to buy and sell EGRs, with the pilot app going live on October 15. Under the pilot program, people will be able to create EGRs by submitting their gold at authorised collection centres and trade them through their demat accounts on the NSE EGR segment.
Despite the launch, EGRs have seen minuscule trading volumes, ranging between ₹1 crore and ₹2 crore in September, with the number of trades hovering around 50 a day. As reported by Business Standard, while bullion vendors will convert their gold into EGRs and help build supply, the exchange is working to generate retail demand for smaller denominations. The exchange has completed agreements with refiners, assayers for quality checks, vault managers and depositories, with the centres testing purity and weight of gold before conversion to EGRs within two hours. The centres will test the purity and weight of the gold, and if one agrees to submit it, the EGR will be reflected in the demat account within a couple of hours.
Industry players have raised concerns about the additional 3% GST on EGRs, which could limit adoption according to SMC Group's Ajay Garg. As reported by Business Standard, he noted that back-office and front-office vendors are still building and testing required systems, preventing them from offering EGRs to clients. Garg expects the convenience of physical delivery to outweigh the marginally higher cost for many clients, while sellers could reduce margins to maintain competitive pricing. The biggest hindrance to adoption right now is operational, as back-office and front-office vendors are still building and testing the required systems, so while EGRs are already live on the exchanges, they are currently unable to offer them to clients. Industry experts suggest there's potential for brokers to offer systematic investment plan options in EGRs to drive further participation once the offering gains traction.
