Bloomberg has revealed that India’s Pension Fund Regulatory and Development Authority (PFRDA) is reviewing the removal of restrictions on certain types of investments—most notably gold-backed exchange-traded funds (ETFs)—in response to mounting requests from pension fund managers.
Mounting Pressure from Fund Managers
According to government and industry sources, pension fund managers held several meetings with senior officials at the authority in July, urging them to allow greater allocations to gold ETFs. Reports suggest that the regulator has already circulated a draft proposal on gold investments for feedback from the funds.
This initiative aims to provide new avenues to boost returns for India’s pension funds, which collectively manage assets worth an estimated USD 177 billion.
Current Restrictions
Under the existing regime, investments in gold, real estate, and infrastructure are classified as alternative assets and may not exceed 5% of a pension fund’s total portfolio. Fund managers, however, are seeking to raise this cap to allow broader diversification and stronger returns.
Surge in Pension Fund Assets
The value of India’s pension fund assets has more than tripled since the pandemic, driven by rapid economic growth and greater public participation in the financial system. Despite this, the regulator has yet to finalize the proposed changes.
Gold Shines in 2025
Gold’s appeal is evident this year. Some of the country’s largest gold ETFs—including Nippon India ETF Gold, SBI ETF Gold, and HDFC Gold ETF—have delivered gains of nearly 30% since the start of 2025.
According to the World Gold Council, Indian gold ETFs recorded net inflows for the third consecutive month in July. Though inflows slowed to INR 12.6 billion (USD 146 million), down 41% from June, they remained 34% above the 2024 monthly average.
Market Growth
Total assets under management in Indian gold ETFs reached INR 676 billion (USD 7.85 billion) at the end of July, a 96% year-on-year increase.
Total gold holdings rose to 68 tonnes, with 1.2 tonnes added in July alone.
The number of investor accounts (folios) climbed by 215,000 in July, bringing the total to 7.86 million, up 42% year-on-year.
One new gold ETF was also launched in July, raising the total number of listed gold ETFs in India to 21.
Conclusion
Lifting the 5% cap on pension fund investments in gold ETFs could mark a turning point for India’s rapidly expanding gold market, strengthening the country’s position as one of the world’s leading hubs for precious metal investment—especially against the backdrop of global economic and geopolitical uncertainty.
Follow the latest news on Google News
