Gold, silver ETFs get a new vaulting framework: SEBI raises vault managers' net worth requirement

The Securities and Exchange Board of India (SEBI) has approved changes to its vault manager regulations, expanding the regulatory framework beyond Electronic Gold Receipts (EGRs) to cover bullion underlying a wider range of SEBI-specified bullion-related instruments, including gold and silver ETFs and bullion derivatives.

The move is aimed at creating a common and harmonised framework for vaulting services as India's bullion market expands. SEBI said the review will strengthen requirements covering the storage, safekeeping, segregation, reconciliation, security, insurance and governance of bullion held by vault managers.

The existing SEBI (Vault Managers) Regulations, 2021 were introduced primarily to regulate vault managers providing services for gold underlying EGRs. The framework covers areas such as registration and eligibility of vault managers, custody and safekeeping of gold, quality and purity standards, record keeping, reconciliation and insurance.

Under the amendments approved by SEBI, the scope of the regulations will be expanded beyond EGRs to include vaulting services for bullion underlying ETFs and derivatives on bullion. The EGR-specific provisions will be replaced by a product-neutral framework covering bullion-related instruments.

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SEBI will also replace the existing term “Gold Standards” with “Bullion Delivery Standards”, extending delivery-standard requirements to bullion underlying all specified bullion-related instruments.

One of the most significant changes is the increase in the minimum net worth requirement for vault managers. The threshold will rise from ₹50 crore to ₹75 crore.

The regulator is also strengthening security requirements. Vault managers will have to address risks including theft, burglary, fire, fraud, terrorism and cyber-attacks through their security policies and procedures.

The revised framework will expand requirements for segregation of activities and bullion. These provisions will cover vaulting services across all specified bullion-related instruments, with additional requirements for instrument-wise and entity-wise segregation of bullion stored by vault managers.

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SEBI will also require vault managers to appoint a Compliance Officer, with the regulations specifying the broad responsibilities of the officer.

A consequential circular will subsequently operationalise the amended framework, including requirements relating to storage and safekeeping, quality standards, reconciliation, inspection, audit, insurance, security, infrastructure, risk management and grievance redressal.

SEBI said the changes are intended to reduce regulatory fragmentation and establish consistent standards for bullion custody and safekeeping, while strengthening investor protection through improved safeguards, traceability, reconciliation and risk management.

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