In today’s Finshots, we talk about EGRs (Electronic Gold Receipts). Yup, that’s it.
The Story
NSE just launched Electronic Gold Receipts (EGRs). You could think of them as “demat gold”. Much like shares sitting in your demat account, EGRs are digital certificates that represent physical gold stored in SEBI-accredited vaults. And since they exist electronically, you can buy and sell them on the stock exchange just like stocks.
But EGRs aren’t exactly new.
Sure, NSE launched its EGR segment on May 4th, 2026. But BSE had already introduced India’s first EGRs during Muhurat trading in 2022, after SEBI approved the framework for spot gold trading and the creation of a gold exchange.
The problem, though, is that EGRs still haven’t really taken off. For context, Gold ETFs saw their Assets Under Management (AUM) jump a whopping 2,600% over the last decade to ₹1.7 lakh crore by March 2026. EGRs, on the other hand, don’t even have enough transaction volume data to make meaningful comparisons. But it’s safe to say that trading activity in EGRs remains far lower than Gold ETFs (funds that give you exposure to gold prices without having to physically own the metal).
And to understand why, we first need to understand how EGRs actually work.
Say you’re a jeweller, refiner, trader, institutional investor, or even a regular retail investor holding physical gold. You can take that gold to a SEBI-registered vault manager and ask them to create an EGR.
The vault manager first checks whether the gold meets strict purity standards and verifies its weight. If everything checks out, they store the gold securely in their vault and get EGRs credited to your demat account through depositories like CDSL or NSDL. From that point onward, your physical gold stays inside the vault, while you hold digital EGRs that can be traded on the stock exchange just like shares.
Now, for all of this to work smoothly, the gold also needs to be standardised. That’s why every EGR represents a fixed quantity of gold, such as 1 g, 10 g, 100 g, or even 1 kg.
But perhaps the most important feature is that EGRs are not just meant for trading. You can also convert them back into physical gold whenever you want by placing a withdrawal request with your vault manager. The EGR gets cancelled and the equivalent quantity of gold is returned to you, with the exact purity and weight mentioned in the certificate.
There’s also another useful feature that EGRs carry ― interoperability. This simply means that even if your EGR was created through a vault manager in Ahmedabad, you can still redeem the physical gold from another vault manager in Mumbai.
Now we know what you’re thinking. If EGRs let you invest in gold, trade it easily like a security, and even convert it into physical gold later (unlike ETFs), all without worrying about storage or depending on jewellery store schemes, then why aren’t more people trading in them?
The answer is fairly simple. Most retail investors and even many financial advisors barely knew the product existed, while Gold ETFs and Sovereign Gold Bonds (SGBs) were getting far more attention.
Then there was the infrastructure problem. Initially, only three vault managers — Sequel Logistics, Malca-Amit JK Logistics, and Brinks India, were approved. That limited geographical reach made depositing or withdrawing physical gold inconvenient for regular investors.
But NSE could potentially change that. After all, it crossed 13 crore unique registered investors last month. And even though BSE’s unique investor numbers are not publicly available, NSE still dominates more than 90% of India’s equity and derivatives trading volumes. That’s despite BSE having more than double the number of listed companies.
Besides, NSE’s investor base has grown rapidly over the last five years, at a CAGR of 26%, much higher than the 15% growth seen between FY16 and FY21. So with such a massive network of brokers and trading members already connected to the NSE ecosystem, EGRs could finally see wider participation and deeper trading activity.
The timing of NSE’s EGR launch is also something you have to consider here. Until now, most people wanting exposure to gold had to choose between Gold ETFs, gold mutual funds, or physical coins and bars. SGBs are no longer much of an option because the government appears to have quietly stopped issuing them over the past couple of years due to the high costs involved.
This creates a gap in the market. Because if you want exposure to gold prices without worrying about storage, but still want the option to convert your investment into physical gold later, that’s not so easy anymore.
Digital gold isn’t the perfect solution either, since SEBI has recently warned investors that it does not regulate these products as securities.
And that’s where EGRs could fit in nicely. They potentially offer the best of both worlds. You get exposure to gold prices, the flexibility to trade the instrument like a security, and the option to convert it back into physical gold whenever needed. Say, during a wedding in the family, which remains one of the biggest reasons Indians buy gold in the first place.
But apart from all that, what’s actually in it for you as an investor?
Well, for starters, it solves one of the biggest problems with buying gold in India: purity.
Because when people buy gold jewellery or even gold coins from local jewellers, there’s often some uncertainty around quality, especially outside large cities where hallmarking standards are still uneven. India has close to 800 districts, but mandatory hallmarking currently covers only about half the country.
EGRs work differently. Before any gold enters the system, a SEBI-regulated vault manager checks its purity and certifies it to LBMA (London Bullion Market Association) or BIS (Bureau of Indian Standards). So when you buy an EGR, you know exactly what you own.
The second advantage is accessibility. EGRs can be bought in very small quantities, even as little as 100 mg (equivalent to 1 unit). At current gold prices, that works out to roughly ₹1,500. So instead of saving up to buy a gold coin or jewellery, you can slowly build your gold investments bit by bit over time.
They’re convenient as well. EGRs trade from 9 am to 11:30 pm, which partly overlaps with global gold market timings. So if international gold prices move sharply because of some global event, you don’t have to wait till the next morning to react.
And finally, EGRs could potentially change how gold loans work.
Gold loans are already a huge business in India. Usually, someone walks into a bank or NBFC with gold jewellery, the institution values the gold, and then gives out a loan against it.
But the problem is that this process isn’t always clean or efficient. Gold valuation can sometimes be subjective, and over the years there have also been concerns around questionable lending practices in the sector. We’ve written about it here.
EGRs could make things much simpler. Because if they become widely accepted, banks could directly accept them as collateral. There would be very little confusion around purity or quantity since everything is already certified and stored safely in regulated vaults. And if a borrower defaults, the lender can quickly sell those EGRs on the exchange.
But that said, it’s also important to understand that EGRs were probably not originally built with retail investors in mind.
The system is largely designed for commercial players such as jewellers, refiners, and bullion traders. These are businesses that regularly buy large quantities of physical gold, bear storage risks themselves, and often deal with different gold prices across regions in India.
EGRs help solve many of those problems since the gold is standardised and traded electronically. So, prices can become more uniform across the country. And because the gold sits inside regulated vaults, businesses don’t have to worry as much about handling and storing large quantities themselves.
That’s not to say that retail investors are not welcome here. But the product’s design and cost structure still lean more toward larger users, which also explains why the experience may not feel as smooth as buying a Gold ETF on a mutual fund app.
For starters, the costs are a little more complicated. With Gold ETFs, the main cost is usually the expense ratio. But with EGRs, you also pay vaulting or storage charges for as long as you hold the gold. And if you decide to convert the EGR into physical gold later, there are delivery charges too. The tricky part is that these costs are not always visible upfront as one simple fee. So investors may need to pay closer attention to understand the true cost of holding EGRs over time.
Then there’s the bit about GST. Buying and selling EGRs on the exchange does not attract GST. But the moment you convert them into physical gold, a 3% GST kicks in. So if your final goal is always to take physical delivery, that tax is unavoidable.
And this perhaps tells us where EGRs make the most sense. They work best for someone who eventually wants physical gold, maybe for jewellery or a family function, but doesn’t want to buy and store it immediately. Instead, they can slowly accumulate EGRs electronically over time and convert them into physical gold only when needed.
And who knows? Maybe getting familiar with EGRs early, even with a small investment while the product is still in its early stages, could help you understand it well by the time it reaches the kind of scale and popularity Gold ETFs enjoy today.
And to truly decide whether it’s for you or not, here’s a brief guide comparing EGRs with the gold investment options you probably already use today.
And that wraps up almost everything there is to know about EGRs. Until next time…
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