The Securities and Exchange Board of India (Sebi) has approved amendments to its Vault Managers Regulations, 2021, expanding the regulatory framework beyond Electronic Gold Receipts (EGRs) to cover bullion underlying specified ETFs and derivatives. According to The Economic Times, the amendments were approved at SEBI's 215th board meeting on Thursday, with the regulator stating the move is aimed at creating a common framework for vaulting services across different bullion-related instruments and strengthening safeguards around the storage and handling of physical bullion. The existing regulations, which were introduced to establish a framework for vault managers providing vaulting services for gold underlying EGRs, were reviewed as the Indian bullion market evolves with the growth of instruments such as gold and silver ETFs and bullion derivatives.
Sebi has raised the net-worth requirement for vault managers from ₹50 crore to ₹75 crore, as reported by The Economic Times. The regulator has also strengthened security requirements to address risks including theft, burglary, fire, fraud, terrorism and cyber-attacks. The revised framework will expand business-wise segregation requirements to cover vaulting services for all Sebi-specified bullion-related instruments, with additional provisions requiring instrument-wise and entity-wise segregation of bullion stored by vault managers. Sebi will also require vault managers to appoint a compliance officer and specify the broad duties of the officer, with governance requirements ensuring proper oversight of physical bullion operations.
According to The Economic Times, the EGR-specific chapter will be replaced with a product-neutral framework covering all 'Bullion related instruments'. Sebi will introduce definitions for 'Bullion' and 'Bullion related instruments', with the term 'Gold Standards' being replaced with 'Bullion Delivery Standards', extending delivery standards to bullion underlying all Sebi-specified bullion-related instruments. The amendments are expected to establish a harmonised and scalable regulatory framework for vaulting services across different specified bullion-related instruments, reducing regulatory fragmentation and providing consistent standards for the custody and safekeeping of bullion. A consequential circular will be issued to operationalise the amended regulatory framework covering storage and safekeeping, quality standards, reconciliation, inspection, audit, insurance, security and infrastructure requirements.
As reported by The Economic Times, the strengthened framework is expected to enhance investor protection and confidence through improved safeguards relating to the storage and safekeeping of bullion, security, segregation, traceability and reconciliation, along with enhanced financial and insurance safeguards and stronger governance and risk-management requirements. The amendments are focused on the custody and management of the physical bullion underlying these instruments, rather than changing the basic way investors buy, sell, or hold gold or silver ETFs. For investors holding gold or silver ETFs, the significance is therefore less about a change in the product itself and more about stronger regulatory oversight of the physical asset backing it, ensuring robust regulatory oversight of the bullion underlying such instruments while facilitating the orderly development of the bullion market.
