The Securities and Exchange Board of India (SEBI) has announced significant amendments to its vault manager regulations, expanding the scope to cover bullion underlying a wider array of SEBI-specified instruments, including gold and silver Exchange Traded Funds (ETFs) and bullion derivatives. This move aims to establish a harmonized framework for vaulting services as India's bullion market continues to grow.
Previously, the SEBI (Vault Managers) Regulations, 2021, primarily focused on regulating vault managers for gold underlying Electronic Gold Receipts (EGRs). The revised framework replaces these EGR-specific provisions with a product-neutral approach, extending consistent standards across various bullion-related instruments.
Increased Net Worth and Enhanced Security
One of the most notable changes is the increase in the minimum net worth requirement for vault managers. This threshold has been raised from ₹50 crore to ₹75 crore, a measure designed to ensure greater financial stability and capacity among service providers.
SEBI is also strengthening security protocols. Vault managers will now be mandated to implement comprehensive security policies and procedures to address a broad spectrum of risks, including theft, burglary, fire, fraud, terrorism, and cyber-attacks.
New Segregation and Compliance Requirements
The updated framework introduces expanded requirements for the segregation of activities and bullion. These provisions will apply to vaulting services across all specified bullion-related instruments, with additional mandates for instrument-wise and entity-wise segregation of bullion stored by vault managers.
Furthermore, vault managers will be required to appoint a dedicated Compliance Officer. The regulations specify the broad responsibilities of this officer, ensuring adherence to the new regulatory standards.
A consequential circular will follow to operationalize these amended frameworks, detailing requirements related to storage, safekeeping, quality standards, reconciliation, inspection, audit, insurance, security infrastructure, risk management, and grievance redressal.
Strengthening Investor Protection
SEBI stated that these changes are intended to reduce regulatory fragmentation and establish consistent standards for bullion custody and safekeeping. The overarching goal is to strengthen investor protection through improved safeguards, enhanced traceability, better reconciliation processes, and robust risk management.