Ban on e-gold: What is the procedure for physical delivery of e-gold?

Investors, who have invested in e-series, can themselves get the commodity converted into physical form and sell it

August 07, 2013 3:47 IST | India Infoline News Service
The government on Tuesday banned trading in e-series contracts at the National Spot Exchange Ltd (NSEL) as it wants the exchange to first settle about Rs. 56 billion as dues to investors, consumer affairs minister KV Thomas said. "We have stopped trading in e-series contracts on NSEL. A notification will be issued in a day or two," KV Thomas added.

In 2008, NSEL had launched 'E-Series' products, through which investors could buy commodities and hold them in a demat form. E-series contracts are investment products that enable investors buy and sell only metals in demat form. This product is available for gold, silver, copper, lead, nickel and platinum.

Investors are unable to sell their demat certificate after NSEL stopped its trading, the only option is to convert it into delivery. After the ban on e-series, no future purchase in the product would take place. Investors, who have invested in e-gold, would get the physical delivery of the gold. Investors, who have invested in e-series, can also get the commodity converted into physical form and sell it.

Investors who have put in Rs. 10 lakh or less will be given priority by NSEL while making payouts, according to a directive from Forward Market Commission.

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.

Below are some steps involved in converting e-gold into physical:
  1. Submit a delivery instruction slip to DP (depository participant) with the surrender request form
  2. DP transfers the e-gold units to the NSEL account based on DIS (delivery instruction slip)
  3. DP then attest the signature of the investor on the transfer request form (TRF) and handover the same to the investor along with the acknowledgement of DIS.
  4. Investor then submits DIS & SRF to NSEL specifying the center from where he intends to take delivery
  5. NSEL computes charges relating to making & packaging charges, delivery charges, VAT and other dues
  6. NSEL communicates the total amount due to the investor through the Email ID provided in the SRF
  7. Investor is then required to make such payment through DD/Cheque in favour of “National Spot Exchange Ltd”.
Short-term capital gains were applicable at the slab rate while long-term capital gains, if the investment was held for over 36 months, were taxed at 20%.

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