The Finance Ministry has specified ‘Electronic Gold Receipt’ (EGR) as ‘securities’ under the Securities Contracts (Regulation) Act 1956, paving the way for trading of such instruments on any new gold exchanges that may come up in the country.
Context
The Finance Ministry has specified ‘Electronic Gold Receipt’ (EGR) as ‘securities’ under the Securities Contracts (Regulation) Act 1956, paving the way for trading of such instruments on any new gold exchanges that may come up in the country.
What is EGR?
- Put simply, an EGR is an electronic receipt issued on the basis of deposit of underlying physical gold in accordance with the regulations made by SEBI.
- Securities and Exchange Board of India (SEBI) will be the regulator for gold exchanges.
- The Warehousing Development and Regulatory Authority would be strengthened to set up the commodity market ecosystem.
- EGRs are held in demat form and can be converted into physical gold when needed.
- To enable trading in physical gold, EGRs (backed by physical gold) canl be traded and settled on stock exchanges.
Impact of the move
- This move would also enable trading of EGR in existing exchanges under a separate segment.
- Like shares, EGRs will be held in demat form and can be converted into physical gold when needed.
- With this move, EGR will have trading, clearing and settlement features akin to any other securities.
