SEBI warns investors about online Digital Gold Purchase
The significance of online digital gold purchase in Indian culture is beyond the glitz and price of the metal. It is a sign of wealth, prosperity, purity and divine blessings, which have been in existence since the times immemorial. It is not just a symbol or a digital gold investment in Indian households is a symbol of tradition, confidence and emotional reassurance.
Cultural beliefs and astrological practices dictate that families in the country buy gold on the particular days of the week and even on certain occasions. Gold in India is therefore not a metal or a financial tool but it is a heritage of belief and fortunes. In this blog we’ll explore online digital gold purchase, digital gold investment, digital gold price, how to buy digital gold, what is digital gold.
What is Digital gold?
Digital gold is the new form of investing in 24-karat pure gold by Indians without having to purchase and store the gold. It is accessible to all and enables one to buy a small or a large quantity of gold online through reputable applications like Paytm, PhonePe, Google Pay, or investment apps like Groww or Zerodha.
Each rupee spent is real gold in secure insured vaults of such reputed institutions as MMTC-PAMP, Augmont, or SafeGold. You may sell it at market prices any time you wish or you may have it delivered in coins or bars when you want. The gold is pure 24K and 99.9 percent, like the standard gold coins. It is one of the most inclusive financial instruments because buyers can start investing with as little as ₹10.
How to buy Digital gold?
Buying digital gold is a simple and convenient process that allows you to invest in 24K pure gold online without physically handling it. To get started, choose a trusted platform such as Paytm, PhonePe, Google Pay, Groww, or official providers like MMTC-PAMP, Augmont, or SafeGold. After selecting your platform, log in or create an account, navigate to the “Gold” section, and enter the amount you wish to invest.
Once the payment is made, an equivalent quantity of 24K gold (in grams) is purchased in your name and securely stored in an insured vault by the provider. You can check your holdings anytime through the app, sell your gold instantly at live market prices, or even request physical delivery in the form of coins or bars.
Online Digital Gold Purchase vs Other Gold Investment
| Rank | Form of Gold Investment | Description | Pros | Cons |
| 1 | Sovereign Gold Bonds (SGBs) | Issued by the RBI on behalf of the Government of India. Investors buy gold in grams and earn 2.5% annual interest plus capital appreciation. | • Backed by Government of India (no risk of theft) • Earns 2.5% annual interest • No making charges or storage cost • Tax-free on maturity (after 8 years) | • Lock-in period of 5-8 years • Limited purchase windows |
| 2 | Gold ETFs (Exchange Traded Funds) | Traded on NSE/BSE; mutual fund units backed by physical gold. 1 unit = 1 gram of gold. | • Regulated by SEBI • Easy to buy/sell on stock exchanges • Transparent pricing | • Brokerage and expense ratio apply • Requires Demat account |
| 3 | Digital Gold | 24K gold bought online via apps (Paytm, PhonePe, Groww, etc.) and stored in insured vaults by companies like MMTC-PAMP or Augmont. | • Can start with as little as ₹10 • Instant buy/sell 24×7 • Backed by real, insured gold • Option for physical delivery | • Not yet regulated by SEBI or RBI • Slightly higher buy/sell spreads |
| 4 | Gold Mutual Funds | Mutual funds that invest in Gold ETFs. | • No Demat account needed • Professionally managed • SIP options available | • Fund management fees apply • Slightly lower returns than direct ETFs |
| 5 | Physical Gold (Coins, Bars, Jewellery) | Traditional form of owning gold, often for personal use or gifting. | • Tangible and culturally significant • Easy for gifting; emotional value | • Making charges (5-25%) • Risk of theft • Purity concerns • No interest income |
Why has the RBI raised a red flag over Digital Gold Purchase?
Grey-area regulation/ absence of regulation
- The digital gold platforms are not typically governed under the primary securities laws: they are not expressly described as the securities under the Securities and Exchange Board of India (SEBI) Act or the Reserve Bank of India Act.
- Due to this they are not subject to the organized supervision that can be afforded to such products as gold ETFs or sovereign gold bonds – that is, investor protections are less strong.
- RBI is not readily able to utilize conventional tools of regulation (e.g. licensing, supervisory audit) since the classification of products is still unclear.
Counter-party & custody risks
- Numerous digital gold systems assert that the exposure of every single investor is secured by physical gold in a vault, but audit stadiums, visibility of holdings, and vault verifications are not transparent.
- When a platform goes down, becomes insolvent, or misapplies the vaults an investor might have a hard time establishing their claim or retrieving the actual gold or an equivalent of its value.
- Due to the above, investors are subject to counter party risk that is greater than regulated financial products.
Financing, delivery and redemption problems
- Though most of the platforms offer buy/sell or physical delivery with no time restrictions, other costs, delays, or redemption or physical conversion might be hidden.
- Physical delivery can involve the payment of charges, minimum quantity requirements or logistic problems, thereby diminishing the real value to the investor.
- Depending on their wallets/platforms, there can be limits on investment or redemption or different spreads.
Issues of pricing transparency and costs
- Digital-gold activities have spreads, storage costs or vault costs, insurance, and shipping/making fees (in the case of physical conversion) in addition to the basic digital gold price, which may not be transparently disclosed.
- These extras are detractions on the effective yield based on best digital gold investment plans (such as sovereign gold bonds or ETFs of gold).
- Due to the lesser regulation, there will be less standardisation and audit/comparison of those cost terms among providers.
None of the interest income / lesser tax benefits
- Digital gold is not subject to the same capital gains tax regime as a sale of sovereign gold bonds, and is sold on a digital gold price appreciation basis only.
- Thus regarding the return and tax efficiency aspect, digital gold can be less favourable- and marketed the same way.
Ambiguity of use of funds and collateral
- Digital gold is relatively new and less standardised, which might cause ambiguity with regard to how they are used, how they support the gold, or can the assets pledged be pledged elsewhere.
- Similar concerns have been raised by the RBI in gold-loan and collateral markets (not necessarily digital gold), pointing to the bigger risk with gold products having no strict control.
Conclusion
The online Digital Gold purchase is instant, easy and best with small investments. The following is the reasons why the Reserve Bank of India (RBI) and other regulators are concerned about investing in digital gold in India – with obvious headings and bullet points to make it easy to read:
The issues raised by the RBI are regulation, custody, transparency, and investor protection. The implication of this to Indian investors is that though digital gold is convenient, easy to enter, it is not a full-fledged risk-free regulated investment product.
FAQ'S
What is Digital Gold?
Digital gold also known as online gold is the one you purchase and save on the Internet. You use apps such as PhonePe, Paytm, Groww, etc. to pay and the site has the respective physical gold in safe vaults. You may sell it any time or later turn it into hard gold. It is convenient and does not have to be stored.
How to Buy Digital Gold?
The online Digital Gold purchase can be done at sites such as PhonePe, Paytm, Groww, Zerodha, or at such brands as MMTC-PAMP and SafeGold. Get the amount of gold you desire or the weight, pay and the gold is stored in a safe vault in your name. The minimum purchase could be 10 rupees.
How do we check the Digital Gold price?
You can see the digital gold prices live on applications at which you purchase (PhonePe, Paytm, Groww). The prices vary during the day in accordance with the world gold prices, exchange rate, and taxation. Always look at Buy and Sell prices (Buy Price and Sell Price) there may be slight differences (spread).
Is Digital Gold Investment Good?
Small, flexible and short-to-medium term investments are good in digital gold. It is perfect for individuals who make their money by gradually piling up gold without the concern of safety or purity. In cases of long term investment, it is better to use Gold ETF or Sovereign Gold Bond.
What is the best and worst investment in India (Digital Gold vs Other Options)?
Sovereign Gold Bonds (Best) – Interests + no capital gains tax upon the maturity. Gold ETF / Gold Mutual Fund This type is simple to trade, charges are minimal. Digital Gold – Easy, and a few minor fees are paid. Physical Gold (Worst) -Storage risk, charge making, deductions on resale.
