Who are Vault Managers?

About Vault Managers:

• The vault manager is regulated as a SEBI intermediary for providing vaulting services meant for gold deposited to create electronic gold receipts (EGRs).
• Obligations of the vault manager: Accepting deposits, storage, and safekeeping of gold, creation as well as withdrawal of EGR, grievance redressal, and periodic reconciliation of physical gold with the records of the depository.
• Registering as a Vault Manager:
  • Any person intending to carry on the business as a vault manager can make an application to SEBI for a grant of a certificate of registration.
  • The applicant shall be a body corporate incorporated in India and shall have a minimum net worth of Rs 50 crore.
  • Every certificate of registration granted will be valid unless it is suspended or cancelled by SEBI.
• Regulations:
  • The vault managers are required to have systems for recording all transactions in electronic form pertaining to vaulting services.
  • They need to maintain the documents to ensure that gold is traceable; details of storage, transfer and withdrawal of gold; purity, quantity and weight of deposited gold; and creation and extinguishment of EGRs.
  • They need to preserve these records and documents for a minimum period of five years.
  • They need to abide by the code of conduct specified by the regulator.
  • The regulator has the right to undertake an inspection of the books of accounts, records, documents and deposits of gold of the vault manager.

What are Electronic Gold Receipts (EGRs)?

• EGRs are a form of depository gold receipts that can be traded on stock exchanges.
• EGR is an electronic receipt issued by the Vault Manager against the gold deposited with them.
• It can be sold and bought in the same way stocks are sold and bought from stock exchanges.
• Creation of EGR:
  • Any person desirous of creating EGRs will have to place a request for the deposit of the gold with the registered vault manager.
  • The vault manager will ensure compliance with the gold standard, weigh the gold bars and check necessary documentation at the time of deposit of gold.
  • The vault manager or any person authorised on this behalf will ensure that the gold is deposited only through an accredited refinery or a nominated agency.
  • Every vault manager will have a common interface with the depository for the creation and extinguishment of EGR.
  • Upon acceptance of the gold from the depositor, the vault manager will create an EGR in the name of such depositor as a beneficial owner by entering details in the common interface.
• Withdrawal of Gold:
  • The beneficial owner seeking to withdraw gold from the vault will have to place a request with the depository.
  • The depository, after satisfying the payment of charges due to the vault manager, will intimate its approval for the withdrawal of gold to the concerned vault manager.
  • Upon receipt of communication from the depository, the vault manager will hand over the gold and extinguish the EGRs.

Q1) What is the Securities and Exchange Board of India(SEBI)?

The Securities and Exchange Board of India (SEBI) was founded as the regulating authority for the Indian securities market on April 12, 1992, by the SEBI Act 1992.It was introduced to promote transparency in the Indian investment market.

Source: Sebi issues procedure for vault managers to seek prior approval for change