Markets

NSEL e-gold investors start getting refunds

Rajalakhmi Nirmal BL Research Bureau | Updated on March 12, 2018 Published on May 28, 2014

gold

 High level sources at the exchange say that subsequent to the beginning of financial closure process, half of the residual gold has also been sold and soon e-gold investors will be fully settled

Good news for the beleaguered e-gold investors of the National Spot Exchange (NSEL). The exchange has disbursed around ₹140 crore so far towards settlement of e-gold units.

Paired trades

NSEL got into trouble last year as it was found to be allowing paired trades. Though initially the commodity markets regulator Forward Markets Commission (FMC) ordered close of only a few commodity contracts, later e-series contracts were also shut.

E-series units were genuine investment products where one could buy a commodity at spot prices in electronic form and hold it in demat form. NSEL undertook to hold these commodities in its warehouse. Investors could redeem units for cash or take delivery of the precious metal whenever they chose.

Of the over 30,000 e-series investors who had invested in various metals including gold, silver and platinum, 23,000 had invested in e-gold, according to the exchange.

The total amount of gold held under e-gold units was 808 kg. After excluding the holdings of Sahara, gold to be settled to investors was 618 kg. As the exchange started the settlement process, some investors took delivery of gold (85 kg) after closing their demat accounts. And now, the exchange is settling the other investors in cash.

90% settlement

NSEL sold close to 90 per cent of the 532 kg of investors’ gold and got a price of ₹2,935.9925 a gram for it through an auction. But since it had to divide this among all investors, it decided to settle it in proportion to the auctioned amount of gold.

Thus, each investor in e-gold has received settlement at the rate of ₹2,633.88 a gram which is around 90 per cent of their money locked up with the exchange. Several investors Business Line spoke to have acknowledged the receipt of credit from the exchange. High level sources at the exchange say that subsequent to the beginning of the process of financial closure, half of the residual gold has also been sold and soon e-gold investors will be fully settled.

On May 23, the exchange began the financial closure process after less than 15 per cent of e-gold units saw re-mat (taking delivery of gold) request from holders. The exchange had delivery options open only in select cities and in specific denominations.

Though gold prices have fallen in the last few days, investors may not get below ₹2,900 a gram say sources in the exchange, as close to 90 per cent of the gold was auctioned at a high rate of ₹2,935.9 a gram.

Auctioning for e-silver has also begun at the exchange.

Published on May 28, 2014
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