The Securities and Exchange Board of India (Sebi) has proposed a 50% increase in minimum net worth requirement for registered vault managers, raising the threshold from ₹50 crore to ₹75 crore. This financial adjustment forms part of a comprehensive consultation paper released on Tuesday (August 11), which outlines plans to expand the scope of the SEBI (Vault Managers) Regulations 2021. The regulator has requested public comments on the consolidated proposals, with a submission deadline set for September 1, 2026. The primary objective is to establish a harmonised, uniform vaulting framework across all financial instruments related to precious metals specified by the market regulator.
Sebi has proposed expanding its Vault Managers Regulations, 2021 from their current focus on gold underlying Electronic Gold Receipts (EGRs) to physical bullion underlying all Sebi-regulated products, including exchange-traded funds (ETFs) and bullion derivatives. The new proposal seeks to extend regulatory oversight to encompass physical gold, silver, and other precious metals that back Gold Exchange Traded Funds, Silver ETFs, and physically settled bullion derivatives. Under the current system, the 2021 regulations strictly govern vault managers handling physical gold underlying EGRs traded on recognised stock exchanges. The expansion aims to eliminate varying standards for identical underlying assets and lower operational risks across the custody ecosystem. The regulator noted that by remaining outside the uniform framework, large quantities of gold and silver are not subject to standard rules on governance, cyber resilience, insurance, and business continuity.
The proposed amendments aim to establish a common regulatory framework for vaulting services across EGRs, bullion ETFs, derivatives on bullion and other bullion-related instruments specified by the regulator. The regulations will replace product-specific terms like 'gold standard' with 'bullion delivery standards', defining quality parameters for different financial instruments. The term 'vaulting service' will also be amended to shift focus from gold specifically to general bullion storage and safekeeping. The framework is designed to strengthen investor protection, operational resilience, transparency, auditability and regulatory supervision, with the regulator planning to introduce or revise definitions and modify operational, audit, reconciliation, inspection, risk management and reporting provisions. Registered entities must implement structural adjustments to maintain compliance with the new requirements.
Under the proposed amendments, Sebi plans to replace provisions that are specific to EGRs with product-neutral requirements. The amendments require vault managers to appoint a dedicated compliance officer responsible for monitoring statutory adherence and resolving investor grievances. This officer must report non-compliance directly to SEBI and submit quarterly compliance reports. Security policies will be broadened from basic theft and burglary protections to cover risks including fire, fraud, negligence, terrorism, and cyber-attacks. Vault managers must also establish clear procedures for tracking data on physical asset reconciliation, insurance policies, and detailed staff profile logs during registration.
The review was necessitated by the growth of physically backed precious metal products and increasing quantities of physical gold and silver held in custody for investors. SEBI noted that the Indian securities market for physically backed precious metal products has expanded, resulting in a substantial increase in the volume of physical bullion held in custody. Currently, the physical assets backing ETFs and derivatives operate outside the vault manager regulations, with mutual funds and clearing corporations managing storage through individual contractual arrangements with specialised commercial vaults. The regulator stated that these commercial storage facilities have assumed systemic importance due to the concentrated volume of investor assets they safeguard. Once approved and notified in the official gazette, the amended regulations will take effect on the 30th day post-publication, officially superseding the previous June 2024 master circular.
