SEBI recently warned of risks involved in buying digital gold. For those looking to understand what this whole issue is about and for more on digital gold, here are a few key questions that are answered for greater clarity
Digital gold or e-gold trading involves buying and selling of the yellow metal via various online platforms. Though the payments are electronic and entirely online, the underlying asset is physical gold. | Photo Credit: istock.com
Market regulator SEBI recently raised the anxiety levels of investors who buy digital gold or e-gold when it warned of risks involved in such dealings. SEBI’s concerns arose from the whole process of buying and selling via various online platforms as they aren’t regulated by it or any other authority.
The rise in gold prices in recent years has increased the popularity of the yellow metal. Many still choose to buy in the physical form as well, even as the electronic mode gains rapid traction.
For those looking to understand what this whole issue is about and for more on digital gold, here are a few key questions that are answered for greater clarity.
What are digital gold/e-gold products? Who sells these products?
Digital gold or e-gold trading involves buying and selling of the yellow metal via various online platforms. Though the payments are electronic and entirely online, the underlying entity asset is physical gold.
MMTC PAMP, the leading refinery of gold and silver in India, offers online purchase and sale of gold via its own platform. Many other firms rely on it for offering the product and are its partners. Digigold and Safegold are other leading platforms that sell via own portals and also have partners associated with them.
Now, apps and portals such as Google Pay, Phone Pe, Amazon Pay and Paytm offer digital and e-gold by partnering with any of the above firms.
Apart from these apps, jewellers such as Tanishq, PC Jeweller, Kalyan Jewellers (Candere) and Jos Alukkas offer the digital gold product via their websites, while partnering with one of the three entities mentioned earlier, at the backend.
It is important to note that these apps and platforms take the services of security agencies, vault providers and logistics firms for storing and transporting the gold.
How do these work? Do investors get physical gold at the end of a specified period?
Digital gold offered by the apps and platforms are fairly simple in their structure. Buyers need to complete a KYC process by submitting their PAN, address and identity proofs, and bank details. The entire onboarding is online.
Once this process is completed, buying or selling gold becomes fairly simple. You just need to log into these platforms and place your order to buy or sell gold by making payments online. Cheques or any physical payments are not accepted.
You can make gold investments for as low a value as ₹100 via these portals.
At the backend, the gold equivalent (up to four decimal places in grams) of the amount you invested is bought by the platform partner from institutional participants in the wholesale bullion market.
This physical gold is stored in safe vaults and the yellow metal is insured. Security agencies such as Brink’s provide the vaults and also take suitable insurance policies for the gold, while storing and transporting.
There is no lock-in for the gold and buying or selling can be done freely, subject to some minor timeline restrictions such as being able to sell the gold you bought only after three days in some cases.
You can buy at any frequency and extend the holding period of gold indefinitely, though some platforms allow a maximum of 10 years.
When you wish to sell the digital gold you bought, you can either choose to receive the money equivalent of the gold or take physical delivery in the form of coins or bars. If you choose coins or bars, these are delivered to your residence in a sealed package.
The gold offered is of the highest purity 24-carat.
Why has SEBI warned investors about these products?
As such, there are no known triggers right now as to why SEBI decided to issue a cautionary statement. There have been no cases of default by any entity or platform dealing in digital gold.
However, no apex agency such as SEBI, IRDAI or the RBI has any role in the entire value chain of digital gold buying and selling. This means there is no regulatory oversight though investors’ money is involved. Price discovery isn’t that transparent.
SEBI may have issued its warning as a matter of caution, especially given the recent rush among investors to buy gold in all forms — physical and electronic — in the backdrop of rising prices.
What are the main risks faced by investors while buying these products?
As mentioned earlier, there have been no cases of counterparty or delivery defaults in digital gold.
However, understanding the costs and price dynamics is the most important aspect when dealing in digital gold. And none of the charges or levies are regulated or controlled.
Also, there are no statutory agencies to address customer grievances.
The gold price on offer in these platforms would not match the spot gold prices or even those announced in the stores of jewellers due to a host of factors.
First, there is buy-sell price spread when dealing with digital gold as the price discovery is not that transparent given that institutional participation dictates the rates.
Therefore, a large gap would mean you end up paying a lot more than standard market rates.
Second, while buying digital gold, there is a 3 per cent GST applicable that is added to the cost.
Third, there are insurance and vault security charges levied. Some platforms may waive these charges for the first few years. However, there is a charge of 0.3-0.4 per cent of the value of gold that is levied subsequently.
Fourth, when you want physical gold delivery in the form of coins or bars, transportation charges are imposed on you, the buyer.
Finally, while taking delivery of gold coins or bars, there are minting charges applicable. This may be to the tune of 3-11 per cent of the value of gold.
As a buyer, you need to be aware of these hidden costs and charges so that you aren’t blindsided by it.
For investors, taking cash equivalent may work out more economical while selling digital gold.
What are the safer alternatives to investors to buy gold?
While digital gold isn’t any less safer just because it is unregulated, given that reputed apps and platforms are involved in offering digital gold, there are other modes of buying gold that offer regulatory oversight.
Gold exchange traded funds (ETFs) offered by mutual funds allow you invest small amounts of a few hundred rupees. These ETFs are traded in the exchanges and have sufficient liquidity. You need demat and trading accounts to buy and sell ETFs.
Each unit of the ETF is usually priced at one-hundredth of a gram of gold.
For those without a demat account, fund of funds that invest in these gold ETFs are available.
Like equity shares, you get the money equivalent of the units of ETFs you sell. These ETFs are also backed by physical gold by the fund houses.
Other gold-buying options include sovereign gold bonds (SGBs) — issued by the RBI — from the secondary market, for which you would need a demat/trading account.
The RBI has discontinued fresh tranches of SGBs in the primary market from early 2025, with the last tranche being issued in February 2024. These SGBs offer the gold equivalent price as of the date when RBI announces redemption of the bonds and also offers a 2.5 per cent additional interest annually.
Published on November 12, 2025
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