Household gold can become productive asset through Exchange-Traded Funds and Electronic Gold Receipts
New Delhi, May 27
India's large household gold holdings can become productive financial assets through wider adoption of Gold Exchange-Traded Funds and Electronic Gold Receipts, according to Devarsh Vakil, Head of Prime Research at HDFC Securities.
In an exclusive conversation with ANI, Vakil said Indian households currently hold nearly USD 3 trillion worth of gold, much of which remains stored in physical form, such as jewellery and bullion. According to him, most of this gold acts as a dormant safety asset and remains outside the formal financial system.
He stated, "To transform this traditional commodity from a stagnant security into a productive financial instrument, broader adoption of digital vehicles such as Gold Exchange-Traded Funds (ETFs) and Electronic Gold Receipts (EGRs) is crucial."
India continues to depend heavily on gold imports to meet domestic demand, which increases pressure on foreign exchange reserves and widens the current account deficit.
Vakil said bringing household gold into the financial ecosystem could help reduce import dependence, support the rupee and create a large domestic funding pool for infrastructure and long-term economic growth.
He stressed that, unlike physical jewellery and bars, these products reduce storage risks, purity concerns and resale-related challenges while improving liquidity and transparency.
According to Vakil, Gold ETFs help channel household savings into the institutional financial system and improve overall banking liquidity.
He added that Electronic Gold Receipts allow physical gold to be converted into dematerialised and SEBI-regulated instruments that can be traded on stock exchanges.
Vakil said EGRs also provide guaranteed purity and instant liquidity while enabling gold assets to be used as commercial collateral within the financial system.
He added, "By providing guaranteed purity and instant liquidity, these mechanisms convert a static family heirloom into a dynamic asset that can be used as commercial collateral, effectively fuelling the nation's credit cycle and economic expansion."
The comments come at a time when gold prices in India remain elevated. Gold prices were trading at Rs 1,55,611 per 10 grams for 24 karat gold at the time of filing this report.
The government has also recently taken steps to curb gold imports by sharply increasing the effective import duty on gold and silver from 6 per cent to 15 per cent.
The revised structure now includes a 10 per cent Basic Customs Duty and a 5 per cent Agriculture Infrastructure and Development Cess.
In addition, the Directorate General of Foreign Trade has capped duty-free gold imports under the Advance Authorisation Scheme for gems and jewellery exporters at 100 kg per licence.
Future import licences have also been linked to export performance, under which fresh imports will only be allowed after at least 50 per cent of previously imported gold is exported as finished jewellery.
Vakil said unlocking India's idle gold wealth can help strengthen the financial sector, reduce external economic vulnerabilities and support the country's long-term growth trajectory.
— ANI
Reader Comments
Finally someone talking sense! Indian households sitting on gold worth $3 trillion is insane. Putting that into EGRs would actually help our economy. Imagine the infrastructure we could build. Also, storing physical gold at home is risky—thefts, purity issues, locker costs. Digital gold solves all that. Good move by SEBI! 💰🇮🇳
What about the tax implications? If I convert my mother's gold bangles into an EGR, will I have to pay capital gains tax? These articles always miss the ground reality. Plus, the import duty increase from 6% to 15% is just hurting honest buyers. Government wants us to stop buying gold but also wants to use our existing gold? 🧐
This is actually brilliant for people like me who don't want to keep physical gold but still want exposure. Gold ETFs have given me 15% returns in the last year. The liquidity he mentioned is real—I can sell my units in seconds during market hours. And purity guaranteed? That's a game changer. I've lost money on 'hallmarked' jewellery before. 📈👍
Good idea in theory but impractical for most Indian households. My mom in a small town has never used a demat account. SEBI needs to educate people first. Also, electronic gold receipts sound like another way for banks to make money while we get less. Remember the gold loan scams? I'm skeptical, but open to being proven wrong. 🤷♀️
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.