InvestorQ : What are the Silver Exchange-Traded Funds (ETFs) launched by SEBI?
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What are the Silver Exchange-Traded Funds (ETFs) launched by SEBI?

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divya Sing answered.
11 months ago
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The Securities and Exchange Board of India, after its Tuesday meeting, announced their decision to allow Mutual Funds houses to sell Silver Exchange-Traded Funds (ETFs ) in the Indian market. Presently, investors in India can only invest in Gold through Gold ETFs, which are backed by physical gold. There was a long demand for Silver and Crude Oil ETFs, the former of which is now allowed by SEBI. Now, Indian investors will be able to invest in Silver through Silver Exchanged Traded Funds (ETFs).

According to SEBI, the general regulations for Silver ETFs will be in accordance with the existing Gold ETFs framework after it amended the SEBI (Mutual Funds) Regulations Act, 1966 to allow for Silver ETFs’ establishment.

As per the announcement, Mutual Fund houses will now launch Silver ETFs to track silver prices in two ways. First, through investing in Silver using derivatives (Futures Contracts) to replicate the returns. Second, by backing the ETFs through physical Silver where the investors can get the delivery of the metal if they prefer. Furthermore, it is expected that SEBI will continue with the common practice of making Mutual Fund houses own physical silver bars for creating Silver ETFs.

Similar to Gold ETFs, Silver ETFs too will work by using the amount invested by the investors to buy hard silver assets. These assets will be stored with the Mutual Fund houses working as the custodian. Once bought, the Silver ETFs will allow the investor a specific right to some quantity of silver in proportion to the invested amount.

Experts think that even though Gold and Silver are often correlated, Silver may have its own independent demand and supply dynamics. As per the scheme’s objective, these Silver ETFs are expected to provide double returns offered by the underlying metal on either the short or the long side. The launch of the Silver ETFs by SEBI is a welcome step towards making investments in Silver truly accessible to investors.


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