SEBI has proposed bringing physical gold and silver backing ETFs and derivatives under the same vault manager regulations as Electronic Gold Receipts. The draft rules include a 50% increase in the minimum net worth requirement for vault managers to ₹75 crore, aiming to standardize storage and security for precious metal assets.
The Securities and Exchange Board of India (SEBI) has released a consultation paper to expand the scope of its 'Vault Managers Regulations, 2021.' Currently, these regulations primarily govern the safekeeping of physical gold backing Electronic Gold Receipts (EGRs) traded on exchanges. The regulator now proposes to extend this framework to cover physical gold and silver that underpin a wider range of products, including Exchange Traded Funds (ETFs) and derivatives.
Net Worth Requirement Hike
A significant part of the proposal is the increase in the financial eligibility criteria for registered vault managers. SEBI has suggested raising the minimum net worth requirement from the existing ₹50 crore to ₹75 crore. This 50% increase in capital requirement is aimed at ensuring that vault operators have sufficient financial strength to handle the risks associated with the increasing concentration of investor assets. By demanding a higher capital base, the regulator intends to ensure that only firms with a strong financial standing are responsible for the physical security of these assets.
Harmonised Operational Standards
The move is designed to create a unified framework for all bullion assets held in SEBI-regulated products. Currently, different precious metal products may follow varying storage and security practices. Under the proposed regime, all vault managers would need to adhere to uniform standards regardless of whether the gold or silver backs an EGR, an ETF, or a derivative contract.
These harmonized standards will cover critical operational areas, including the quality of vault infrastructure, cybersecurity protocols, insurance coverage against theft or damage, and requirements for regular, independent purity verification and audits. The regulator believes that setting these common rules will reduce operational risks and improve consistency across the precious metals market.
Potential Industry Impact
The stricter financial and operational requirements could lead to changes in the industry. Smaller vaulting service providers that are unable to meet the new ₹75 crore net worth threshold or the higher costs of stricter compliance might consider consolidating with larger, more stable entities. While this may reduce the number of players, regulators view this as a necessary step to mitigate the systemic risks that can arise when a large volume of physical assets is concentrated in a limited number of vaults.
This initiative follows a separate move implemented earlier this year on April 1, 2026, where SEBI mandated that Gold and Silver ETFs must use polled spot prices from recognized stock exchanges for valuation, replacing the reliance on London Bullion Market Association (LBMA) prices. The current proposal regarding vault managers is part of the ongoing effort to strengthen local regulatory oversight of bullion-backed investment products. SEBI has invited public comments on these proposed amendments until September 1, 2026.