India’s uneasy relationship with gold has returned to the policy centre stage. Amid pressure on rupee and forex reserves, India has raised gold and silver duties and tightened import norms after Prime Minister Narendra Modi urged citizens to postpone non-essential gold purchases. This is the backdrop in which Electronic Gold Receipts, or EGRs, deserve a fresh look. Coincidentally, the NSE earlier this month launched EGR trading, giving it a potentially wider exchange, broker and investor network.

Indians love gold and the country’s gold import bill crossed $70 billion in FY26 alone. The World Gold Council has estimated India’s household gold stock at up to 25,000 tonnes, much of it sitting outside the formal financial system. At their core, EGRs try to move part of gold ownership and bullion trading from an opaque, fragmented physical market into a regulated, demat-based, exchange-traded system. Here is a lowdown.

Basics

An EGR is an electronic receipt issued against eligible physical gold deposited with a SEBI-registered vault manager and held in demat form. EGRs are also permitted to be pledged or hypothecated, subject to the applicable depository and intermediary process.

For practical purposes, EGRs can be approached in two ways. First, by someone who already holds eligible physical gold, typically bars. This gold has to be deposited with a SEBI-registered vault manager and validated against prescribed purity, denomination and good-delivery norms. Once accepted, equivalent EGRs are credited to the person’s demat account. These can then be held or sold on the exchange. If the holder later wants physical gold, the EGRs can be extinguished and gold can be withdrawn. Note, ordinary household jewellery, even if made of gold, cannot be deposited as-is for EGR creation.

The second route is simpler for investors. A person who wants gold exposure can buy EGRs on BSE or NSE, just like a listed security. The EGR is credited to the investor’s demat account and can be sold on the exchange whenever there is liquidity. Physical delivery is optional; the buyer can continue holding the EGR in demat form or seek withdrawal from a vault location, subject to availability and prescribed charges.

EGRs have been years in the making. Budget 2021-22 proposed a SEBI-regulated Gold Spot Exchange. SEBI cleared the framework in September 2021, and the Finance Ministry notified EGRs as securities in December 2021. SEBI’s operational framework came in January 2022, followed by circulars on trading, vault/depository procedures, product specifications and risk management. BSE launched EGRs on October 24, 2022.

India is one of the world’s largest gold consumers, but has been a price-taker, not a price-setter. Its domestic gold market has long been fragmented. Prices differ across locations. Purity assurance depends heavily on trust. Jewellery buying includes making charges and wastage. Investors often face storage and safety concerns when keeping gold at home. Those who want to keep gold in bank lockers fear that theft-related compensation will not cover loss fully. EGRs were designed to tackle some of these issues.

After BSE’s 2022 launch, the recent change is NSE’s entry. Its May 2026 official launch gives the product another exchange platform.

NSE’s product framework gives EGRs a more visible market structure. Settlement is T+1. Trading is available from 9 am to 11.30 pm or 11.55 pm, depending on the US daylight saving period. Products are available in 995 and 999 purity, with denominations ranging from 100 milligrams to 1 kg. Intended participants include retail investors, jewellers, bullion traders and refineries. But EGRs may need bullion-market users too, not just retail investors.

Costs also matter. In the EGR creation route, depositing eligible physical gold may involve assaying, vaulting, storage and related operational charges. Investors should check these before going ahead. Buying or selling EGRs on the exchange may involve brokerage, exchange transaction charges, applicable statutory levies and demat or depository charges, depending on the broker. Investors should also check whether their broker offers EGR trading. CDSL mentions storage charges of ₹15 per kg per day per beneficial owner.

In practice, this is a vault-storage cost linked to the physical gold backing EGRs, but investors should check with their broker or depository participant on how and when it is recovered. If EGRs are converted into physical gold, vault withdrawal and delivery charges apply, along with 3 per cent GST on the gold value. Capital gains tax applies when EGRs are sold for a profit. While EGRs are relatively clean for exchange trading, the cost advantage narrows if the investor ultimately wants physical gold.

Challenges

That brings us to the uncomfortable question. If the design was sound, why did EGRs not take off after 2022? The framework was elegant, but the market pull has been weak.

Liquidity was the first problem. For EGRs to work well, jewellers, refiners, brokers, bullion traders and investors must participate together. Without that, volumes stay low and spreads remain unattractive. Adoption depends on whether EGRs offer users a clear advantage over existing options, such as better price discovery, tighter spreads, easier settlement, lower transaction friction or simpler conversion into physical gold.

The second problem was investor alternatives. For pure gold price exposure, investors already had gold ETFs, gold mutual funds and Sovereign Gold Bonds (new offerings have been stopped now). ETFs were familiar and easy to trade. SGBs offer annual interest and tax-free redemption on maturity. EGRs had to explain why investors needed one more gold product.

The third problem was the nature of Indian gold demand. EGRs work best when users want standardised investment gold. But Indian gold demand has historically been jewellery-heavy. However, recent high prices have shifted part of the demand towards bars, coins and ETFs.

The fourth problem was jeweller incentive. Local jewellers already control sourcing, customer relationships, pricing, making charges and local trust. Unless EGRs improve their economics or procurement efficiency, adoption can be limited.

The fifth problem was tax friction. Yes, there is no GST on buying or selling EGRs on the exchange, but 3 per cent GST applies when EGRs are converted into physical gold. For someone who eventually wants gold in hand, that bit matters.

The sixth problem was complexity. The product is clean on paper, but the chain includes vault managers, assaying, depositories, clearing corporations, exchanges, brokers and withdrawal centres. For many retail investors, that is harder to understand than an ETF, a coin or jewellery.

Lastly, there is the emergency-use argument. Many households hold gold as a last-resort asset that can be sold, pledged or used locally in a crisis. EGRs are backed by physical gold, but access depends on exchange, demat, broker, depository and vault systems. That may weaken their appeal for buyers who want gold precisely as a system-failure hedge.

Takeaway

In this backdrop, NSE’s entry improves the odds but does not guarantee success. NSE changes distribution, reach and visibility. It does not automatically solve liquidity, spreads, jeweller participation or investor understanding.

EGRs can help create transparent domestic price discovery, reduce purity anxiety, formalise parts of bullion trading and offer a regulated alternative to unregulated digital gold.

Investors should understand where EGRs sit in their portfolio. Compared with physical gold, they reduce locker, purity and making-charge concerns. Compared with digital gold offered by apps and platforms, EGRs have a stronger regulatory footing because they are securities under the SEBI-supervised market framework, while digital gold is not regulated by SEBI as a securities-market product. Digital gold may be easier for very small-ticket buying, but investors need to check storage charges, spread between buy and sell prices, delivery charges, holding-period limits and the credibility of the platform. Compared with gold ETFs, EGRs offer physical convertibility. EGRs are therefore best seen as a bridge between investment gold and physical gold.

EGRs may suit investors who want to buy gold in demat form, trade it on an exchange, and still keep the option of physical delivery. They may also suit holders of eligible gold bars who want to convert them into demat form.

Published on May 16, 2026