Sebi notifies norms to include silver in mutual fund schemes

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NEW DELHI: Providing details on how silver exchange traded funds (ETFs) will be valued, the Securities and Exchange Board of India (Sebi), has notified norms that pave the way for silver or silver-related instruments to be included in the investment schemes of the asset management companies (AMCs).

In the notification dated 9 November, Sebi defined silver ETF schemes as those mutual fund schemes which invest primarily in silver or silver-related instruments, which have silver as the underlying product. The markets regulator added that assets of the scheme should be kept with a registered custodian.

On how these instruments may work in India, Sebi said silver held by an ETF scheme should be valued at the AM fixing price of London Bullion Market Association (LBMA) in US dollars per troy ounce for silver having a fineness of 999.0 parts per thousand.

Gold prices at LBMA are fixed on a daily basis (business day) at 10:30 am and 3 pm GMT.

Additionally, the value of such ETFs can reflect the transportation and other charges that may be incurred in bringing such silver from London to the place where it is actually stored on behalf of the mutual fund. Also, the value of the ETF may also be impacted by notional customs duty and other applicable taxes and levies that may be normally incurred to bring the silver from London to the place where it is actually stored on behalf of the mutual fund.

The markets regulator in September had proposed allowing mutual fund houses to introduce silver ETFs in the Indian market.

“The funds of any such scheme shall be invested only in silver or silver related instruments in accordance with its investment objective, except to the extent necessary to meet the liquidity requirements for honouring repurchases or redemptions, as disclosed in the offer document,” Sebi said in a gazette notification dated 9 November.

Moreover, pending deployment of funds in accordance with this, the mutual fund may invest such funds in short-term deposits of scheduled commercial banks.”

As of now, there are no silver ETFs, unlike gold ETFs that are backed by physical gold in India. The launch of gold and crude oil ETFs has been the long-standing demand of the industry in India.

In India, as of now, people invest in silver through traditional routes such as silver bars, silver coins, and silver jewellery, or through paper forms of silver like futures.

Experts believe that precious metals such as silver, platinum and palladium can be a way to diversify one’s portfolio, away from a single precious metal.

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