Sebi Expands Bullion Vaulting Framework; Raises Vault Manager Requirements

Sebi has expanded its vault managers framework to encompass a broader range of bullion products beyond Electronic Gold Receipts. According to the regulatory announcement, the framework now covers bullion underlying specified exchange-traded funds and derivatives contracts. Concurrently, the Securities and Exchange Board of India raised the net-worth requirement for vault managers to Rs 75 crore, representing a significant increase in financial standing requirements for entities seeking to operate in this space. The expanded framework also strengthens security protocols, asset segregation procedures, compliance mechanisms and governance standards applicable to vault managers overseeing bullion inventories across these product categories.

The regulatory enhancement reflects Sebi's effort to standardize oversight across India's growing bullion market ecosystem. As bullion-linked investment products proliferate—including ETFs that track gold prices and derivatives contracts providing commodity exposure—regulators face mounting pressure to ensure adequate safeguarding of underlying physical assets. The higher net-worth threshold aims to strengthen vault managers' financial resilience and capacity to absorb potential operational losses, while enhanced governance and segregation requirements protect investor assets from commingling or misappropriation. For market participants, stricter vault manager standards may increase operational costs but should boost confidence in the integrity of bullion-backed securities, particularly relevant for retail investors accessing gold exposure through regulated ETF and derivatives channels.

Source: Markets-Economic Times