Electronic Gold Receipt

Gold has always been something Indians save in, but a gold bar or coin sitting in a locker is not a security — you cannot trade it on a stock exchange or hold it in a demat account. An Electronic Gold Receipt changes that. It is an electronic receipt issued against physical gold that has been deposited in accordance with SEBI's regulations, and it can then be traded, held and transferred the way a share is.

The workbook's own definition is precise: "Electronic Gold Receipt means an electronic receipt issued on the basis of deposit of underlying physical gold in accordance with SEBI regulations."

Section 2(h) of the Securities Contracts (Regulation) Act, 1956 defines "securities", and one limb of that definition — clause (i) — covers "such other instruments as may be declared by the Central Government to be securities." The workbook's footnote records exactly when that happened for gold: "Vide Gazette notification dated December 24, 2021, Central Government has declared 'Electronic Gold Receipt' as securities."

That one notification is what makes an EGR different from simply owning gold. Because it is a declared security:

• it falls within SEBI's regulatory perimeter, the same perimeter that covers shares, bonds and mutual fund units;
• it can be listed and traded on a recognised stock exchange;
• it sits in the same statutory list as other instruments the Central Government has separately declared securities, including onshore rupee bonds issued by multilateral institutions (such as the Asian Development Bank and the International Finance Corporation) and the Zero Coupon Zero Principal instrument (declared a security by a separate Gazette notification of 16 July 2022, for use by not-for-profit organisations registered with Social Stock Exchanges).

The underlying gold itself does not vanish — the EGR exists because physical gold has been deposited against it, in accordance with SEBI's regulations. The receipt is the tradeable claim on that deposit.

Ms Deepika Rao in Bengaluru wants to invest in gold without keeping bars at home. Instead of buying jewellery or coins, she deposits physical gold with a SEBI-recognised vault and receives an Electronic Gold Receipt representing that gold, credited to her demat account.

Because the December 2021 Gazette notification declared the EGR a security, she can now:

• hold it in her existing demat account, alongside her shares and bonds, rather than needing separate storage;
• sell it on a recognised stock exchange to another investor, the way she would sell a share, instead of finding a jeweller willing to buy back gold at a fair price;
• rely on the same securities-market regulatory framework — disclosure, settlement, investor grievance redress — that covers her other holdings.

Without the 2021 notification, none of this would follow automatically: physical gold, on its own, is not a security and cannot be dealt with on a stock exchange in this way. The notification is what turns "gold in a vault" into "a security an investor can trade".

Chapter 1 (Understanding Securities Markets and Performance), section 1.2, lists the Electronic Gold Receipt inside the Section 2(h) SCRA definition of "securities", with the December 2021 notification given in the workbook's own footnote. Expect a question asking which instruments the Central Government has separately declared as securities — EGR, onshore multilateral rupee bonds, and the Zero Coupon Zero Principal instrument are the three the workbook names — and a question on the date of the EGR notification.

• Physical gold is not a security; an Electronic Gold Receipt is. The declaration under Section 2(h) is what brings it inside the securities-market framework — ordinary gold jewellery or coins are never securities, however they are held.
• The EGR notification is dated 24 December 2021; do not confuse it with the Zero Coupon Zero Principal instrument's notification of 16 July 2022 — both sit in the same clause of the definition but are separate instruments for separate purposes.
• An EGR is issued against gold actually deposited, in accordance with SEBI's regulations — it is a receipt for real underlying gold, not a synthetic or purely notional exposure.
• This entry is deliberately limited to what Chapter 1 of this workbook states — the mechanics of EGR trading, vaulting and conversion are taught in more depth elsewhere; this page covers only how and why the EGR became a "security" in the first place.