India’s gold investment ecosystem may be entering a new phase with the National Stock Exchange (NSE) formally launching Electronic Gold Receipts (EGRs), a SEBI-backed framework that allows investors to buy, hold, trade, and even redeem gold digitally through stock exchanges.

Investment banker and CA Sarthak Ahuja believes the new structure could address several long-standing problems associated with both physical gold and Gold ETFs. “Now there is a new way to invest in Gold, which is better than keeping gold in the locker or in the form of ETF,” Ahuja said, explaining how EGRs combine the benefits of physical and digital gold ownership while reducing operational and pricing inefficiencies.

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What are NSE Electronic Gold Receipts?

Electronic Gold Receipts, or EGRs, are digital certificates backed by physical gold stored in secure NSE-recognised vaults. These receipts trade on the exchange much like shares or bonds and are held in investors’ demat accounts.

The launch operationalises SEBI’s Gold Exchange framework first announced in 2022.

Under the system:

Physical gold is deposited with authorised vault managers
Equivalent digital receipts are issued
Investors can buy and sell these receipts through brokers
Gold can later be redeemed physically

NSE currently offers EGRs for:

995 purity gold
999 purity gold

Investment denominations range from 100 milligrams to 1 kilogram, making the platform accessible to both retail and institutional participants.

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Why EGRs solve key gold investment problems

CA Ahuja highlighted several structural issues with traditional gold investing.

1. Physical gold comes with storage and safety risks

According to Ahuja, one of the biggest misconceptions among Indian investors is the safety of bank lockers.

“Keeping physical gold in the locker is unsafe because if there is theft, you will only get 100 times your locker rent,” he noted.

In many cases, compensation limits may be far lower than the actual value of gold stored.

Apart from theft concerns, physical gold ownership also involves:

Locker charges
Purity concerns
Making charges
Regional pricing differences

“The rate of Gold is different with every jeweller, every state,” Ahuja said.

2. Gold ETFs don’t offer physical ownership flexibility

While Gold ETFs solved storage problems by digitising gold exposure, Ahuja argues they introduced another limitation.

“Keeping gold in the form of Gold ETF in your demat account means that you can only invest in mutual funds that hold gold, and you can never convert it to physical gold,” he said.

Gold ETFs primarily offer price exposure rather than direct redeemable ownership of physical gold.

How EGRs attempt to combine both worlds

Electronic Gold Receipts (EGRs) combine the security of physical gold with the convenience of digital investing, offering investors a more flexible and transparent way to own gold. Unlike traditional physical gold or Gold ETFs, EGRs provide exchange tradability, standardised nationwide pricing, and the option to convert holdings into physical gold when required.

Under the EGR framework, gold is stored in exchange-recognised vaults while investors hold digital receipts in their demat accounts, enabling secure ownership, easier trading, and seamless redemption into physical gold.

Ahuja described this as a “one nation, one rate” mechanism, potentially reducing pricing inconsistencies across states and jewellers.

What about taxation and costs?

EGRs are taxed similarly to physical gold investments under capital gains rules, with indexation benefits available in applicable cases.

One important operational feature is that GST is payable only when physical delivery is taken, not while merely holding or trading EGRs digitally.

However, unlike Sovereign Gold Bonds (SGBs), EGRs do not provide interest income.

“It doesn't offer any interest rate like in the case of SGBs... but that's alright,” Ahuja said.

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What investors should watch

While EGRs may offer a cleaner structure for gold investing, adoption remains at an early stage.

Currently:

• Many retail broking apps have not fully integrated EGR trading
• Liquidity depth is still developing
• Investors will need to understand vaulting and redemption charges

Still, the framework could significantly modernise India’s fragmented gold market by bringing exchange-level transparency, standardisation, and liquidity to physical gold ownership.

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