What’s behind the vault of India’s gold exchange
India is creating a national, exchange-traded channel for standardized physical gold through Electronic Gold Receipts (EGRs), backed by gold held in registered vaults.
- Electronic Gold Receipt means a demat-held claim on standardized physical gold that can be bought and sold on a stock exchange.
- Before EGRs, physical gold trading used separate jewellers, bullion dealers, and over-the-counter markets, so prices could vary across regions despite similar metal quality.
- Vault manager deposit verification includes weighing, assaying, and checking the gold before converting it into EGRs.
- Fungibility means converting an EGR back gives gold that matches EGR purity and quantity specs, not necessarily the exact same bar originally deposited.
What happened: Electronic Gold Receipts (EGRs) as a national gold trading layer
Electronic Gold Receipts (EGRs) are designed to create a national, exchange-traded channel for buying and selling standardized physical gold. Gold depositors place eligible physical gold in registered vaults and receive EGRs credited to their demat accounts. EGRs then trade on stock exchanges, while the underlying gold stays in the vault rather than being physically moved after every trade.
Background and earlier position: fragmented physical gold trading and inconsistent prices
UPSC can examine how Electronic Gold Receipts redesign gold trading by combining physical verification (registered vaults) with electronic ownership and settlement (depository + exchange + clearing). The key framing for answers is how standardization and fungibility can improve price discovery while retaining physical delivery as an option.
