NSE Launches Electronic Gold Receipts, but Investors Still Favour ETFs and Physical Gold

Four years after India's market regulator opened the door to it, gold that you can hold in a demat account, and also claim as a physical bar, is still waiting for its crowd. This month the National Stock Exchange began trading Electronic Gold Receipts, or EGRs, hoping its reach will do what the BSE's October 2022 launch did not.

An EGR is a digital certificate backed by real gold kept in a vault regulated by the Securities and Exchange Board of India. It sits in a demat account the way a share or an ETF does. Receipts come in denominations of 0.1 gram, 1 gram, 10 grams, 100 grams and 1 kilogram, with contracts in both 99.5% and 99.9% purity. Shweta Rajani of Anand Rathi Wealth puts it plainly: buy a 1-gram receipt and you become the beneficial owner of one gram of gold of at least 999.5 purity, tradable on the BSE and NSE during market hours.

The comparison that hangs over the product is the gold ETF. Sebi announced its Gold Exchange Framework in January 2022. Since then, gold ETFs have built assets of Rs.1.78 lakh crore across 1.24 crore folios, and took in net inflows of Rs.3,040 crore in April 2026 alone, according to AMFI data. EGRs have no comparable figure to show.

Harish Sharma of Sanctum Wealth says the delay came from having to build an entirely new market framework around gold. Regulators had to treat gold as a financial security, not just a commodity, and write rules for vault managers, exchanges and the depositories NSDL and CDSL. Vault managers had to be registered and monitored, purity standards made uniform, and systems built so every receipt matches gold actually held. The depositories then had to fit the receipts into their demat systems. Even with all that done, investor interest remained the open question.

Rajani says gold is a very personal asset in India, and many buyers still go straight to a jeweller. Those who only want exposure to the price already had a clear route through gold ETFs. That leaves EGRs in a narrow middle ground. Sharma adds that jewellers, refiners and brokers were wary of leaving the over-the-counter bullion market for an exchange model. Without enough participants and market makers, volumes stay thin. EGRs still trade with lower volumes and wider bid-ask spreads, which can leave them at a slight premium to spot gold. Those gaps are expected to narrow as liquidity improves.

The cost picture is mixed. Buying through the exchange avoids the 3% GST that applies to buying physical gold directly. But brokerage, exchange and demat charges still apply, and vaulting and storage fees may too, depending on how long the receipts are held. Taking delivery of a bar or coin means withdrawal and delivery charges plus 3% GST on the gold's value at redemption. Delivery is not immediate: the request goes through a broker, then the vault manager arranges it, and since no standard timeline is specified it can take several days depending on procedures and the vault's location. Not every broker offers EGR trading. Investors also depend on vault managers to safeguard the gold and reconcile it with electronic records, and Sebi's rules reduce but do not remove that risk.

On tax, EGRs count as listed securities. Rajesh H. Gandhi of Deloitte India explains that a sale within 12 months produces short-term gains taxed at the investor's slab rate, while holding beyond 12 months qualifies for long-term treatment at 12.5% without indexation. Converting EGRs into physical gold, or depositing gold to create receipts, is not a transfer for capital gains purposes and triggers no tax.

The case in their favour is regulation, transparency and standardisation in a market that has been fragmented and opaque, and an exchange-traded alternative to app-based digital gold that operates outside Sebi's framework. They also bridge ETFs and physical gold, since they trade like the former but can be converted into the latter. Whether they catch on depends on how fast liquidity improves and whether investors see enough value to justify the storage and other costs. For people who just want gold's price movement, ETFs may remain the simpler and cheaper choice. The thing to watch is whether NSE's wider reach narrows the premiums and starts drawing investors away from ETFs and jewellers.