India’s securities regulator has pulled the physical metal behind gold and silver exchange-traded funds into a broader vaulting regime, extending rules once built mainly for electronic gold receipts.

SEBI’s vault-manager amendments do not rewrite how investors buy or sell gold and silver ETFs. They harden custody standards for the bullion those funds hold, with sharper rules on segregation, security, quality, and the capital strength of vault operators.

The approval came at SEBI’s 215th board meeting on Thursday, according to a LiveMint report on the board decision. The regulator expanded its Vault Managers Regulations so vaulting services cover bullion underlying SEBI-specified instruments, including gold and silver ETFs and bullion derivatives.

That matters because ETF units and physical bars are not the same claim. Investors hold units in demat accounts. The mutual fund scheme holds the underlying bullion, which sits in vaults. Trust in the product rests on that storage chain as much as on the ticker price.

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SEBI framed the review as a response to market growth rather than a product redesign.

As the Indian bullion market continues to evolve with the growth of bullion-related instruments such as Gold and Silver Exchange Traded Funds (ETFs) and derivatives on bullion, a need was felt to review the existing framework,

the regulator said, as cited in the report.

From EGRs to a common vaulting frame

SEBI introduced specific Vault Managers Regulations in 2021. Those rules were designed mainly for gold underlying Electronic Gold Receipts. They covered registration, safekeeping, insurance, purity checks, record-keeping, and reconciliation.

Gold and silver ETFs sat under the mutual fund framework for their underlying holdings until this change. The board decision now folds vaulting for ETF bullion, and for bullion derivatives, into the same regulatory tent as the older EGR regime.

SEBI’s stated aim is a common framework for vaulting services across bullion-related instruments, with stronger safeguards around storage and handling of physical metal. A consequential circular will follow to put the amended framework into operation. The board approval is the policy step; the circular is the plumbing.

Custody detail is easy to ignore when prices run. It is harder to ignore when paper claims on metal multiply. The same concern shows up in other forms of digital or tokenized exposure, where tokenized gold’s fine print on vault backing decides whether a claim is metal or marketing.

What changes for vault managers

The amendments focus on custody and management of physical bullion. They do not alter the basic buy, sell, or hold mechanics of gold and silver ETFs. That distinction is important for holders who might otherwise read “new vault rules” as a trading rule change.

Key requirements, as described in the reporting, include:

  • Segregation of bullion by the instrument and the entity for which it is held
  • Security controls covering risks such as theft, burglary, fire, fraud, terrorism, and cyberattacks
  • Replacement of EGR-specific “Gold Standards” with broader “Bullion Delivery Standards”
  • Appointment of a compliance officer with specified responsibilities
  • A higher minimum net-worth for vault managers, raised from ₹50 crore to ₹75 crore

Segregation is the quiet center of the package. Metal held for one instrument or entity should not blur into metal held for another. In a stress event, sloppy pooling is how paper claims and physical bars stop matching. Naming theft, fraud, fire, terrorism, and cyber risk in the same breath also shows how modern vault risk is both physical and digital.

The shift from “Gold Standards” to “Bullion Delivery Standards” widens the quality rule set beyond gold EGRs. Silver ETF metal and other covered bullion now sit under a broader delivery standard, at least in regulatory design. Full operational detail still waits on the circular SEBI said it will issue.

Raising minimum net-worth from ₹50 crore to ₹75 crore is a capital filter. Higher capital does not eliminate operational failure. It does raise the balance-sheet bar for firms allowed to hold other people’s metal. Governance gets a named point of accountability through the compliance officer requirement.

Why physical custody still sets the trust premium

Gold and silver ETFs are convenient. They are also claims on metal stored somewhere else, under someone else’s controls. For capital-preservation investors, the product is only as sound as the custody chain behind the unit.

That is why storage rules keep surfacing whenever physical demand thickens. Large import waves and bar-and-coin preference put pressure on vault capacity and allocated holding practices, a pattern visible when China’s gold imports surged past 1,000 tons and buyers leaned into physical channels.

SEBI’s release language is forward-looking and protective in tone. The strengthened framework is expected to enhance investor protection and confidence in SEBI-specified bullion-related instruments through improved safeguards, the release said, as cited in the report.

The strengthened framework is expected to enhance investor protection and confidence in SEBI-specified bullion-related instruments through improved safeguards,

according to that same official wording.

Expectation is not proof. The board has approved the direction. Effectiveness will depend on how tightly the circular defines segregation tests, delivery standards, insurance and reconciliation practices, and enforcement against vault managers who miss the mark.

What the rules do not settle

Several practical points remain open in the available reporting. The absolute calendar date of the Thursday board meeting is not stated beyond the meeting number. The full text of the Bullion Delivery Standards is not laid out. The compliance officer’s “specified responsibilities” are named as a requirement, not itemized in detail here. No schedule of affected ETF schemes, vault operators, or bullion tonnage appears in the account.

Until the consequential circular lands, investors should treat the change as approved architecture rather than fully live operating code. The direction is clear. The day-to-day checklist for vault audits, breach reporting, and transition timelines still needs the operational document SEBI said it will publish.

Policy moves around physical metal are not unique to one market. State-level recognition of gold and silver as money, including cases where Texas treats gold and silver as legal tender, pushes the same underlying question: who holds the metal, under what rules, and with what proof of claim.

Portfolio reading for metals holders

For holders of India-listed gold or silver ETFs, the first-order message is custody quality, not a new trading signal. Unit creation and redemption mechanics are not the target of these amendments. The target is how vault managers store, separate, secure, and stand behind the bars and coins that back those units.

That still belongs in a due-diligence file. Paper gold is only a monetary hedge if the claim maps cleanly to metal. Allocated segregation, independent checks, insurance, and solvent custodians are the boring work that makes a bullion-backed product durable when markets get disorderly.

The same logic applies when investors compare bullion, ETFs, and equity miners. Miners carry operating and jurisdiction risk. ETFs carry structure and custody risk. Coins and bars carry storage and personal-security risk. None of those layers disappear because a regulator updates a rulebook. The update can still reduce one specific failure mode: weak vault standards behind fast-growing bullion products.

Institutional price optimism tends to pull more capital into convenient gold vehicles. When forecasts climb and flows follow, custody plumbing gets more important, not less, a point that sits beside the wider interest sparked when Bernstein’s $5,600 gold target joined other institutional bulls.

SEBI’s package is also a reminder that silver sits in two roles at once. It is a monetary metal and an industrial input. Broadening standards from gold-only language to bullion delivery language matches that mixed market, at least on the regulatory surface.

None of this tells an investor to switch vehicles on the headline alone. It does tell serious holders to read ETF scheme documents, custodian disclosures, and future SEBI circular language with fresh attention to segregation and vault capital. Confidence is earned in the vault, not in the brochure.

In a system full of claims on claims, the parties who keep the metal separate, insured, and audited are doing the real monetary work.