BSE launches Electronic Gold Receipts

Context

The Bombay Stock Exchange (BSE) has launched  Electronic Gold Receipt (EGR) on its platform, a move that will help in efficient and transparent price discovery of the metal.

• It introduced two new products of 995 and 999 purity, and trading will be in multiples of 1 gram and deliveries in multiples of 10 gram and 100 gram.

Background 

• In the Union Budget 2021-22, Finance Minister Nirmala Sitharaman announced the setting up a SEBI-regulated gold spot exchange. 
• Then, on September 28, 2021, Sebi introduced two new investment instruments, EGR and silver ETFs.

What is EGR?

• The Bombay Stock Exchange’s (BSE) Electronic Gold Receipt is backed by physical gold and is India’s spot physical gold exchange product.
• EGR is India’s first spot physical gold exchange product. EGR trading is similar to buying and selling stocks. 
• Investors can now trade in gold similar to shares with the launch of Electronic Gold Receipts (EGR) by the BSE. BSE is the first exchange in India to launch EGR.
• In India, electronic gold trading happens through gold derivatives or gold exchange-traded funds (ETFs) on stock exchanges. EGR is the first spot physical gold exchange trading product.
• Gold will first have to be converted into a Demat account similar to share trading and then with the receipt investors can trade in gold.  This Gold will be in vaults and vault manager will be provided by ERG.

Need of the initiative

• India is the second largest consumer of gold globally, with annual gold demand of approximately 800-900 tones, and holds an important position in the global markets.
• Despite being second only to China, in consumption of gold, India has remained only as a price-taker in the global markets.
• To address the issue, the Government of India have authorized the introduction of a gold exchange where the metal will be traded in Electronic Gold Receipts (EGR) form on Indian exchanges (BSE, NSE etc.)
• EGR allows efficient price discovery and standardization of gold, transparency in gold transactions, promotion of India Good Delivery Standard and settlement guarantee to the Investors.