Brief
India’s Gold ETFs Halt Fresh Investments as SEBI Issues Warning
Regulatory concerns lead to a temporary freeze on fresh gold ETF inflows, while digital gold sees record UPI purchases.
By Felo News Desk · Published
Mutual fund houses in India have temporarily stopped accepting fresh investments in gold and gold‑silver exchange‑traded fund (ETF) fund‑of‑funds (FoFs), a move prompted by a regulatory nudge from the Securities and Exchange Board of India (SEBI), according to New Indian Express.
What happened
The suspension comes just before the Diwali festive season, a period traditionally strong for gold buying. SEBI’s caution follows its November 2025 advisory that digital gold is not a notified security nor a regulated commodity derivative. While the freeze applies to new inflows, existing holdings remain untouched.
What the reports add
New Indian Express notes that digital gold, sold through apps such as Google Pay, PhonePe, Paytm and Gullak, has surged in popularity. UPI‑based digital gold purchases peaked at ₹3,926 crore in January 2026 and reached a record 254 million transactions worth ₹3,172 crore in March 2026. Over the twelve months to September 2026, total digital gold bought via UPI apps amounted to ₹30,757 crore.
What was said
The outlet reports that SEBI warned investors that digital gold “operates outside the regulator’s purview, leaving investors exposed to counter‑party and operational risks.” It also cites industry players – MMTC‑PAMP, SafeGold (Digital Gold India) and Augmont – as the primary custodians behind the digital gold offered on the platforms.
How it came about
Digital gold’s growth has been driven by its low entry barrier – purchases can start from ₹1 – and the convenience of buying 24‑carat gold online. However, the article highlights hidden costs: a 3 % GST on every purchase, handling and processing charges that create a 2.5‑5 % spread between buying and selling prices, and potential future storage fees. Tax treatment mirrors physical gold, with short‑term gains taxed as income and long‑term gains subject to 12.5 % capital gains tax after 24 months. The lack of formal investor‑protection mechanisms has spurred the creation of the Digital Precious Metals Assurance Council of India, while the finance ministry is reportedly consulting on a framework that would require each unit to be backed by audited physical gold.
Key facts
- Mutual funds have halted fresh investments in gold and gold‑silver ETFs and FoFs ahead of Diwali. (newindianexpress.com)
- Digital gold purchases via UPI apps peaked at ₹3,926 crore in January 2026. (newindianexpress.com)
- SEBI warned that digital gold is not a notified security nor a regulated commodity derivative. (newindianexpress.com)
- Investors pay 3 % GST on digital gold purchases and a spread of 2.5‑5 % between buy and sell prices. (newindianexpress.com)
- Long‑term capital gains on digital gold are taxed at 12.5 % after 24 months. (newindianexpress.com)
Sources
- [1] newindianexpress.com — originally reported as “Gold ETF doors shut this Diwali. Is digital gold a safe substitute?”
