SEBI lays the framework for gold, social stock exchanges

Suresh P Iyengar Mumbai | Updated on September 29, 2021

Experts say move will lead to transparent price discovery; help social entities raise funds

SEBI on Tuesday announced a slew of big ticket decisions, including a framework for setting up a gold exchange that will provide investors security in the form ofelectronic gold receipts (EGR). The market regulator also approved the creation of a social stock exchange to enable non-profit organisations and for-profit enterprises raise funds.

Under the framework for gold exchange, EGRs will be available for trading on the existing stock exchanges. Like shares, these EGRs will be held in demat form and can be converted to physical gold when needed.

“India is a net importer of gold. The whole idea is to move from being price-takers to price-setters. Price discovery at the exchanges will bring transparency in gold pricing,” said Ajay Tyagi, Chairman, SEBI, after the board meeting on Tuesday.

Ajay Tyagi   -  Businessline


One-nation, one-price

EGR denomination and its conversion to gold will be decided by the stock exchange with the approval of SEBI, said the market regulator.

SEBI accredited vault managers to accept gold deposits, create EGRs, handle gold withdrawal, and periodically reconcile physical gold with the depository records. The vault manager will have a net worth of at least ₹50 crore.

Experts said EGR will lead to one-nation one-price of the yellow metal. The gold exchange is expected to offer a host of benefits for the value-chain participants such as efficient and transparent price discovery, investment liquidity, and assurance in the quality of gold, SEBI said.

SEBI also approved a separate framework for social stock exchange for the listing of non-profit organisation and for-profit social enterprises that are engaged in 15 broad eligible social activities approved by the market regulator.

The social entities can raise funds through equity, issue of zero coupon zero principal bonds, mutual funds, social impact funds and development impact bonds.

Social impact funds

Existing social venture funds will be rechristened social impact funds and can have a reduced corpus of ₹5 crore against ₹20 crore prescribed earlier.

SEBI will engage with Nabard, SIDBI and stock exchanges towards instituting a capacity-building fund with a corpus of ₹100 crore.

Experts said with India ranking 129 among 189 countries on the Human Development Index, the social exchange could do more for the social sector. While funds from individual philanthropists amounting to ₹70,000 crore in 2018, according to Bain and Company, there is an opportunity to help these entities tap other sources of funding such as international philanthropy, domestic CSR, official development assistance, and so on.

Published on September 28, 2021

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