India bans e-gold, e-silver trade; Investors hurry on to turn into physical form


MUMBAI (Scrap Register): The world's biggest bullion consumer, India has banned its e-series trade including e-gold, e-silver through National Spot Exchange (NSEL) on Tuesday, even as investors are hurrying to convert their paper gold and silver to physical form.

“We have stopped trading in e-series contracts including e-gold, e-silver through National Spot Exchange (NSEL). A notification will be issued in a day or two,” said India's Food and Consumer Affairs Minister, K.V.Thomas on Tuesday.

The average daily turnover in the e-series segment was around Rs 100-200 crore, according to the source.

"Clients are unable to sell their demat certificate after NSEL stopped its trading, the only option is to convert it into delivery," said a Mumbai-based broker said to ET.

The Central Depository Services (CDSL) and National Securities Depository Services (NSDL) acted as the depository for e-series contracts of NSEL and issued depository certificates. The clearing and settlement, and pay-in and pay-out mechanism on these contracts were based on T+2 cycle.

On July 31, the NSEL suspended trade in all contracts except 'e-series' following the government's direction not to launch new contracts because of violation of some rules. NSEL is grappling with the problem of payment settlement of about Rs 5,600 crore after the suspension.

NSEL offers e-series contracts in gold, silver, copper, zinc, lead, nickel and platinum. Under e-series contracts, retail investors can buy and sell commodities in demat form. This is a unique market segment, which functions like the cash segment in equities, but offers commodities in the demat form in smaller denominations.

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