Gold Exchange Framework Proposal In India
Source : Indian Express
GS III : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Why in News ?
Securities and Exchange Board of India (SEBI) has issued a consultation paper proposing draft regulations for exchanges that permit trading in gold.
- Gold Exchange Framework Proposal In India now out for public feedback.
- Finance Minister in budget speech for FY22 had announced that the Sebi will be the regulator for gold exchange.
Key Facts
- It has proposed an elaborate framework wherein one can convert physical gold into Electronic Gold Receipts (EGR) and even convert those back into physical gold.
- Proposed flow of transactionsin the Gold exchange
- The entire transaction in the proposed Gold Exchange has been divided into three tranches
- First Tranche : Conversion from Physical Gold to Electronic Gold Receipt
- Second Tranche: Trading of Electronic Gold Receipton stock exchange/s
- Third Tranche: Conversion from Electronic Gold Receipt to Physical Gold
- The proposed denominations reflecting underlying physical gold of EGRs are 1 kilogram, 100 gram, 50 gram and subject to conditions, those can also be even for 5 and 10 gram.
- Key issues on which SEBI needs public feedback
- Taxation is a key issue as the EGRs would be traded on an exchange, Securities Transaction Tax (STT) would be levied.
- GST would be applicable when EGRs are converted into physical gold for withdrawal.
- feedback on the kind of incentives or waivers that should be sought from the government to make the segment more investor-friendly.
- What should be the smallest denomination for conversion of EGR into physical gold.
Need for regulations
- India is the second largest consumer of gold globally with annual gold demand of approximately 800-900 tonnes, and holds an important position in the global markets.
- Despite being second only to China, in consumption of gold, India has remained only as a price-taker in the global markets.
- At present, India does not play any significant role in influencing the global price-setting for the commodity.
- The proposed gold exchange would infuse transparency in gold transactions and over a period of time enable India to emerge as a global price setter for the commodity.
Gold Exchange
- It would offer trading facilities in gold.
- Entities like retail investors, banks, foreign portfolio investors jewellers and bullion dealers among others would be allowed to trade on the exchange.
Methods of Investment
- Buy physical gold, a visit to the neighbourhood jeweller
- Buy gold in digital form from paltform like Paytm, Indiagold
- Sovereign gold bonds issued by the government
- Gold funds by mutual funds
Securities and Exchange Board of India
- The regulatory body for securities and commodity market in India.
- A non-statutory body for regulating the securities market.
- The jurisdiction of Ministry of Finance, Government of India.
- Basic functions is to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto.
- The SEBI Borad
- The chairman is nominated by the Union Government of India.
- Two members, i.e., Officers from the Union Finance Ministry.
- One member from the Reserve Bank of India.
- The remaining five members are nominated by the Union Government of India, out of them at least three shall be whole-time members.
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