MFs can hold gold certificates in physical form: Sebi

The Securities and Exchange Borad of India (Sebi) on Friday allowed mutual funds (MFs) to hold gold certificates issued by banks in the physical forms as well, in addition to the ones in demat form, for investments made in gold deposit schemes (GDS).

So far, MFs were allowed to hold such gold deposit certificates only in dematerialised or electronic forms.

“Gold certificates issued by banks in respect of investments made by gold exchange-traded funds (ETFs) in GDS can be held by MFs in dematerialised or physical form,” Sebi said in a circular.

The regulator said the circular had been issued “to protect the interests of investors in securities and to promote the development of, and to regulate the securities market”.

Earlier this year, the market watchdog had allowed gold ETFs of MFs to invest in GDS of banks, as part of its efforts to utilise idle assets of the precious metal for more productive purposes.

According to the the norms, total investment by gold ETFs in GDS cannot exceed 20 per cent of the total asset under management of such schemes.

It was also stated before investing in GDS, mutual funds would have to put in place a written policy related to the investment with due approval from the board of the asset management company and the trustees.