NSE's Electronic Gold Receipts: What needs to be checked before investing

Costs, liquidity, and the mechanism for conversion to physical gold are aspects you must understand before taking the plunge

The National Stock Exchange of India (NSE) launched trading in electronic gold receipts (EGRs) on May 4, 2026. Investors should understand the structure, costs, benefits and limitations of this new product before taking exposure. 

How EGRs work 

EGRs are dematerialised securities. “These certificates are backed one-to-one by physical gold of certified purity stored in Securities and Exchange Board of India (Sebi)-accredited vaults,” says Harish Sharma, associate director, Sanctum Wealth. They allow investors to trade gold in electronic form on the NSE.  Investors can hold them in a demat account. 

A retail investor must have a trading and demat account. The account must be with a broker that offers EGR trading. Investors need to search for the EGR symbol and then place an order on NSE. 

Once an order is placed, an equivalent amount of gold is verified for purity and deposited in a vault. “The gold is then converted into an EGR and credited to the investor’s demat account,” says Mahendra Luniya, chairman, Vighnaharta Gold, a gold trading platform. 

Investors can sell EGRs on the exchange whenever required. “They can also redeem them for physical gold,” says Sharma. Physical conversion will work through authorised vault managers and delivery centres.  

Factor in expenses 

Investors should not assume that EGRs are cost-free merely because they do not carry an expense ratio. “EGR investors will incur brokerage and exchange transaction charges while buying or selling. They will also have to incur demat account charges and vaulting expenses,” says Anand K Rathi, co-founder, MIRA Money.  

Investors who seek physical delivery will face additional costs. “Goods and services tax (GST) may apply if the investor converts EGRs into physical gold. They may also have to pay making or delivery costs if they seek physical redemption,” says Amit Suri, founder and chief executive officer (CEO), AUM Wealth. 

 

Storage and purity benefits 

Investors do not have to worry about purity. “EGRs are backed by gold having standardised 995 and 999 purity,” says Suri.

Luniya points out that EGRs eliminate the risk of storing physical gold at home. Investors also do not have to incur the cost of a locker. 

Sharma points out that exchange-based trading should lead to improved price discovery.  

EGRs also offer a secure and guaranteed settlement (T+1) mechanism through the National Clearing Corporation Limited (NCCL).  

Investors can convert electronic holdings into physical gold. “Interoperability between vault managers means gold deposited in one location can be redeemed from another location,” adds Luniya. 

EGRs are available in multiple denominations, starting from as small as one milligram and going up to one kilogram. “EGRs are expected to support small-ticket investments and make gold accessible to a wider audience,” says Luniya. 

Investors are also saved from incurring the making charges and wastage fees linked with jewellery purchases. 

EGRs operate within a regulated ecosystem involving Sebi, NSE, National Securities Depository Limited (NSDL), and vault managers. The product also offers investor protection within a regulated framework. “EGRs could deepen India’s organised bullion market,” says Suri. 

Luniya says that EGRs may, in the future, enable instant digital gold loans through electronic marking of lien. They are also expected to reduce regional differences in gold prices across India. 

Liquidity may take time to develop 

Market depth and investor participation are likely to develop gradually. In the initial phase, high bid-ask spreads could impose a less visible cost on investors. “Limited initial trade volumes may lead to wider bid-ask spreads and less pricing efficiency,” says Rathi. He adds that EGRs could become cost-efficient over time once liquidity improves. 

Suri points out that storage costs could reduce long-term efficiency. Sharma highlights that delivery fees and GST on physical redemption could erode returns. 

EGRs versus gold ETFs 

EGRs do not have an expense ratio. “EGRs may work out to be cheaper than exchange-traded funds (ETFs) over long holding periods because there is no recurring mutual fund-style expense ratio,” says Rathi. 

Gold ETFs and fund-of-funds (FoFs) have tracking errors, which means their returns may differ from actual gold prices. FoFs carry an extra layer of cost as they invest in ETFs instead of directly holding gold. 

EGRs can be converted into physical gold. “Retail investors are not given this option in the case of gold ETFs and FoFs,” says Gnanasekar Thiagarajan, director, Commtrendz Research. 

Harsh Vira, chief financial planner and founder, FinPro Wealth, points out that gold ETFs and FoFs are more established and liquid. Investors in gold FoFs do not require a demat account and can invest through systematic investment plans (SIPs).

  Checks to run before investing 

Investors should assess liquidity before investing in EGRs. They should check trading volumes, storage charges, redemption rules, and operating fees such as brokerage and delivery-related charges. 

“They should also understand the operational complexities around physical conversion, vaulting and settlement,” says Rathi. Suri adds that those seeking physical redemption should account for GST and delivery-related costs before making a decision. 

Use for long-term exposure 

Retail investors should use EGRs as a long-term digital gold ownership product. “They should not be treated as a trading instrument,” says Rathi. 

Thiagarajan adds that the product is ideal for retail investors interested in holding gold and converting it into a physical asset. 

“Beginners, passive investors, and SIP-focused investors may find gold ETFs or FoFs simpler, more liquid, and easier to manage,” says Vira. 

Investors should be alert towards bid-ask spreads if liquidity remains shallow. “Since the EGR market is still developing, investors should start with limited exposure until liquidity and participation improve,” says Vira. 

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The writer is a Mumbai-based independent journalist