SEBI Expands Vault Manager Framework to Cover Gold and Silver ETFs and Bullion Derivatives — September 24, 2026

In a significant reform aimed at strengthening India’s digital bullion ecosystem, the Securities and Exchange Board of India (SEBI) has expanded the scope of the SEBI (Vault Managers) Regulations, 2021. The regulatory oversight—previously restricted primarily to physical gold backing Electronic Gold Receipts (EGRs)—now encompasses physical bullion underlying gold and silver exchange-traded funds (ETFs) as well as bullion derivatives contracts.

The overhaul establishes a harmonised, product-neutral vaulting framework to govern physical gold, silver, and other precious metals that serve as underlying assets for any SEBI-regulated financial instrument.

Standardising Custody Across Bullion Assets

Until now, SEBI’s Vault Managers Regulations applied strictly to gold deposited for creating EGRs traded on domestic stock exchanges. In contrast, the physical gold and silver backing mutual fund ETFs and the underlying bullion delivered through exchange-traded derivatives were deposited in commercial vaults governed by disparate arrangements.

This dichotomy meant that the same physical underlying asset was subjected to different custodial standards, audit checks, and compliance rules depending solely on the wrapper—be it an ETF, a derivative contract, or an EGR—through which an investor held the exposure.

Under the revised structure, commercial vaults holding bullion for ETFs and derivatives must operate under registered vault manager guidelines, aligning their operations with the stringent criteria already applicable to the EGR ecosystem.

Key Safeguards and Operational Mandates

The unified framework standardises operational protocols across the lifecycle of stored bullion, replacing EGR-specific clauses with universal regulatory requirements:

• Mandatory Registration and Net Worth: Vault managers must be registered intermediaries with SEBI, incorporated in India, and meet prescribed minimum net-worth criteria (historically pegged at ₹50 crore under the 2021 regulations) to guarantee capital adequacy and operational stability.
• Rigorous Audit and Reconciliation: Vault managers must maintain continuous electronic documentation and undergo periodic physical reconciliations of stored bullion against records maintained by depositories, mutual fund trustees, and clearing corporations.
• Traceability and Assay Standards: Physical bullion admitted into registered vaults must meet accredited purity benchmarks, including London Bullion Market Association (LBMA) or Indian Good Delivery standards, ensuring that retail and institutional investors hold authenticated assets.
• Risk Management and Insurance: Facilities must maintain comprehensive insurance cover against physical damage, theft, and loss, alongside robust disaster recovery and business continuity frameworks.

Why the Move Matters for Indian Investors

India ranks as one of the world's largest consumers of physical gold, and domestic investor appetite for electronic and paper bullion products has experienced unprecedented expansion. Gold and silver ETFs managed by domestic mutual funds have witnessed surging assets under management, while physically settled commodity contracts on exchanges like MCX continue to handle sizable physical volumes.

By bringing all underlying bullion assets under direct supervision and registered vault managers, SEBI removes counterparty ambiguity. Mutual fund unitholders investing in gold and silver ETFs can now be assured that the underlying metal bars kept in vaults adhere to the same statutory inspection, insurance, and audit scrutiny that govern exchange-cleared receipts.

The transition also paves the way for seamless interoperability across the commodity ecosystem, simplifying physical delivery processes for trading participants while tightening institutional confidence across India’s bullion markets.

Tags: SEBI Gold ETFs Silver ETFs Bullion Derivatives Commodity Markets Mutual Funds