SEBI has introduced a proposal to update vaulting rules for physical gold, extending them beyond Electronic Gold Receipts to cover all regulated products like ETFs and derivatives. This shift aims to standardize safety, audit, and storage procedures for investors across the gold market.
The Securities and Exchange Board of India (SEBI) has released a consultation paper to overhaul how physical gold is managed and stored for investment products. The regulator proposes expanding the 'Vault Managers Regulations, 2021,' which currently only govern Electronic Gold Receipts (EGRs), to include physical bullion backing all SEBI-regulated instruments. This includes gold exchange-traded funds (ETFs) and gold derivatives.
Moving to a Unified Framework
Currently, rules for storing and auditing gold vary depending on the specific product. Under the new proposal, SEBI intends to introduce product-neutral requirements. This means the same strict standards for vault infrastructure, cybersecurity, insurance, and audit procedures will apply regardless of whether the gold backs an EGR, an ETF, or a derivative contract.
By moving away from product-specific rules, the regulator aims to create a consistent framework. This involves updating how vaults report data, handle reconciliation, and manage risk. For investors, this is intended to provide a uniform layer of protection and transparency, as all gold-backed products would be held to the same storage and security standards.
Strengthening Gold Market Integrity
This proposal is part of a broader regulatory trend to make India's bullion market more robust and investor-friendly. Earlier in 2026, the regulator introduced updates such as requiring gold and silver ETFs to use exchange-published polled spot prices for valuation and implementing revised price bands to manage volatility. These actions, combined with the new vaulting proposal, show a clear push toward harmonizing operations across all precious metal products.
The initiative also addresses how vault managers operate on a day-to-day basis. The proposed framework sets common rules for physical inspections, business continuity plans, and how grievances are addressed. By forcing all vault managers to follow these standardized practices, SEBI hopes to minimize the risk of operational failures or inconsistencies in how underlying physical assets are tracked.
Investor Context and Next Steps
For investors, these rules are unlikely to cause immediate changes to how they buy or sell gold ETFs, but they matter for long-term safety. A standardized, transparent vaulting process helps ensure that the physical gold backing an investment is secure, properly insured, and audited against clear, regulator-mandated guidelines.
As the industry moves toward these harmonized procedures, there could be a period of adjustment for vault managers who must align their operations with the new, consolidated framework. The regulator is currently inviting public comments on these proposals. Investors should monitor future SEBI circulars to see how these rules are finalized and when they will be implemented across the industry.