SEBI Considers Revamp of Gold and Silver Valuation for Mutual Funds to Align with Domestic Prices

New Delhi (Economy India): The Securities and Exchange Board of India (SEBI) is actively reviewing the methodology used to value physical gold and silver held by mutual funds through Exchange-Traded Funds (ETFs). The aim is to establish a more uniform, transparent, and domestically relevant pricing mechanism, aligning it better with prevailing Indian commodity market rates.

In a consultation paper released on Wednesday, SEBI proposed a key shift in valuation norms for gold and silver held by Asset Management Companies (AMCs). The regulator suggested that instead of using London Bullion Market Association (LBMA) reference prices, fund houses should consider using spot prices published by domestic commodity exchanges, such as the MCX (Multi Commodity Exchange).

---

🧐 Why the Change?

Currently, AMCs use LBMA benchmark rates converted into Indian Rupees for valuing gold and silver ETF holdings. However, this method doesn’t fully reflect the actual domestic market dynamics, including import duties, logistics, and local premiums or discounts.

SEBI’s move aims to:

• Standardize valuation methods across fund houses
• Ensure better alignment with local investor expectations
• Improve transparency and comparability in NAV calculation of commodity-based ETFs

“A harmonized approach using Indian spot prices will reduce discrepancies in fund valuation and improve investor trust,” said a regulatory official familiar with the proposal.

---

📊 What SEBI Proposes:

1. Domestic Commodity Exchange Prices: Use spot prices from Indian commodity exchanges as the primary benchmark for valuation.
2. Discontinue LBMA-Based Valuation: Phase out reliance on global benchmarks not fully reflective of Indian conditions.
3. Daily Disclosure Norms: Strengthen rules around daily price disclosures by AMCs holding physical gold and silver.

---

📉 Impact on Mutual Fund Industry

This proposal may impact the way ETFs disclose NAVs (Net Asset Values), potentially causing minor fluctuations in valuations in the short term. However, over time, experts believe it would result in more consistent and locally meaningful valuations, benefiting investors and institutions alike.

India is one of the largest consumers of gold globally, and Gold ETFs have seen significant inflows in recent years. Any refinement in pricing norms will directly affect portfolio accuracy, investor perception, and regulatory compliance.

---

🗣 Industry Reaction & Next Steps

The regulator has invited public comments on the proposal till a designated deadline. Asset management firms, commodity exchanges, and investor associations are expected to weigh in with feedback.

If approved, SEBI may introduce amendments to mutual fund regulations, and AMCs may need to rework their back-end pricing infrastructure.

---

🔍 Broader Regulatory Trend

This move comes as part of SEBI’s broader push to enhance transparency, standardization, and investor protection in India’s growing mutual fund industry, which now manages assets worth over ₹55 lakh crore.

---

(Economy India )

Source (PTI)