The Securities and Exchange Board of India (SEBI) approved the proposal of establishing silver exchange-traded funds (ETFs) in India at its board meeting on September 28.
In India, silver has been treasured for thousands of years. The industrial sector and the community at large are the main sources of demand for precious metal. Because of its wonderful characteristics and the fact that it is a cheaper alternative to gold, silver has a lot of industrial use. Silver prices in India are influenced by industrial trends involving large-scale silver utilization.
Silver ETF Dynamics
In India, unlike the gold ETFs that are backed by physical gold, there are no silver ETFs. The industry in India has been demanding for the launch of silver and crude oil ETFs for a long time.
“The board adopted an amendment to the Sebi (Mutual Funds) Regulations, 1996 to allow the establishment of silver exchange-traded funds with certain protections in line with the existing regulatory system for gold ETFs,” Sebi said in a statement following the meeting.
Even while silver is frequently connected with gold, experts believe it may have its own demand and supply dynamics.
Because, according to Sebi, Silver ETFs will be launched in accordance with the existing regulatory framework for gold ETFs, the existing laws may provide insight into how the new asset class would function in India. Check different ways to invest in silver.
Silver ETF Details
The fund manager or custodian of a silver exchange-traded fund (ETF) invests primarily in physical silver assets held in trust. Silver ETFs, which are normally set up as grantor trusts, provide each share represented by the ETF a precise right to a certain amount of silver. Silver has long been the focus of commodities portfolios around the world. These silver-tracking ETFs have cost ratios ranging from 30 to 95 basis points.
When compared to gold, silver has a higher volatility. For the gold ETFs they administer in India, mutual funds must purchase actual gold. The regulator is expected to stick to its policy of requiring fund houses to own physical silver bars in order to participate in silver ETFs.
A gold ETF unit, according to the Association of Mutual Funds in India (Amfi), represents actual gold in paper or dematerialized form. One gram of gold is equal to one Gold ETF unit, which is backed by actual gold of extremely high purity.
Silver is used in a variety of industries in addition to being a precious metal. Electronic items and electric vehicles are also made with it. For astute investors, silver can serve as a stand-in for such emergent themes.
Fit and proper criteria
The Securities and Exchange Board of India (Sebi) has decided to amend the criterion for establishing who is a “Fit and Proper Person” and has approved the launch of silver exchange-traded funds (ETFs) in the country.
Fit and Proper Person standards, according to Sebi, will be principle-based or rule-based depending on the situation.
Integrity, honesty, ethical behavior, reputation, fairness, and character should all be part of the principle-based criterion, according to Sebi in a statement following the board meeting.