Current Affairs Topics Archive
International Relations Economics Polity & Governance Environment & Ecology Science & Technology Internal Security Geography Social Issues Art & Culture Modern History

SEBI proposes to review base price and price band for ETF

February 14, 2026 4 min read Economics GS3 (Economics Capital Markets)
On This Page ▼

What Happened

  • The Securities and Exchange Board of India (SEBI) has proposed revamping the base price and price band framework for Exchange Traded Funds (ETFs).
  • The current price band mechanism may not be aligned with the maximum permissible price range of the underlying assets, creating a lag and potential market risks.
  • SEBI proposes using T-1 day NAV or indicative NAV (iNAV) as the base price instead of the current methodology, which has an inherent one-day lag.
  • Differentiated price bands are proposed: 10% for equity/debt ETFs (expandable to 20%), 6% for gold/silver ETFs (expandable to 20%), and 5% for overnight ETFs.
  • Public comments have been invited till March 6, 2026.

Static Topic Bridges

Exchange Traded Funds (ETFs) -- Structure and Growth in India

An ETF is a type of investment fund that is traded on stock exchanges, combining features of mutual funds (diversified portfolio) and stocks (real-time trading). ETFs track an underlying index, commodity, or basket of assets. India's ETF market has grown significantly -- from approximately Rs 1 lakh crore AUM (2018) to over Rs 7 lakh crore AUM (2025). The growth has been driven by EPFO's investment in equity ETFs (Nifty 50 and Sensex ETFs), Bharat Bond ETFs for debt, and increasing retail participation in gold ETFs.

  • ETF AUM in India: over Rs 7 lakh crore (2025); approximately 85% in equity ETFs
  • Types: Equity index ETFs, Gold ETFs, Silver ETFs, Debt ETFs (Bharat Bond), Sectoral/Thematic ETFs
  • EPFO's ETF allocation: up to 15% of incremental corpus in equity ETFs (Nifty/Sensex); approximately Rs 2 lakh crore invested
  • Bharat Bond ETF: launched December 2019; invests in AAA-rated PSU bonds; managed by Edelweiss AMC
  • Gold ETFs: hold physical gold; each unit typically represents 1 gram; AUM approximately Rs 40,000 crore
  • Key differences from mutual funds: ETFs trade intra-day at market price; mutual fund units are redeemed at NAV

Connection to this news: The rapid growth in ETF AUM -- especially in gold and silver ETFs -- has exposed gaps in the price band framework, where extreme price movements in underlying commodities can cause ETF trading to be suspended due to outdated price bands.

SEBI's Market Regulation Framework for Trading Instruments

SEBI, established by the SEBI Act, 1992, is the regulator for securities markets in India. ETFs are regulated under SEBI (Mutual Funds) Regulations, 1996 (now consolidated as SEBI (Mutual Funds) Regulations, 2026). Price bands (circuit limits) are a market stability mechanism that prevents extreme price movements by halting trading when a security's price moves beyond a specified range from the previous day's close. For index-based instruments, the circuit limits are coordinated with stock exchange surveillance systems.

  • SEBI established: April 12, 1992 (statutory body); replaced the Controller of Capital Issues
  • SEBI (Mutual Funds) Regulations: govern all mutual fund operations including ETFs
  • Price bands on stocks: 5%, 10%, or 20% depending on the security's characteristics
  • Index-wide circuit breaker: triggered at 10%, 15%, and 20% movement in Sensex/Nifty (market-wide halt)
  • iNAV (indicative NAV): real-time estimated NAV of ETF based on underlying asset prices; published by AMCs during trading hours
  • Authorised Participants (APs): large institutions that create/redeem ETF units directly with AMC; arbitrage keeps ETF price near NAV

Connection to this news: SEBI's proposal addresses the technical problem of base price calculation for ETFs, where using T-2 day closing prices (current practice) creates a lag that can result in price bands that are either too wide (allowing excessive volatility) or too narrow (causing unnecessary trading halts).

Gold and Commodity Markets in India

India is the world's second-largest consumer of gold (after China), importing approximately 700-800 tonnes annually. Gold serves as a store of value, jewellery, and investment vehicle. Gold ETFs and Sovereign Gold Bonds (SGBs) have been promoted as alternatives to physical gold, reducing import demand. Silver, both an industrial metal and precious metal, has seen growing ETF demand. SEBI's proposed tighter price bands (6%) for gold and silver ETFs reflect the higher day-to-day volatility of commodities compared to equity indices.

  • India's gold imports: approximately 700-800 tonnes annually; import bill: approximately $40-50 billion
  • Sovereign Gold Bonds: issued by RBI on behalf of the Government; 2.5% annual interest; maturity 8 years
  • Gold ETFs in India: approximately Rs 40,000 crore AUM; each unit backed by physical gold
  • Silver ETFs: launched in 2021; AUM approximately Rs 10,000 crore
  • MCX (Multi Commodity Exchange): primary platform for commodity futures including gold and silver
  • Import duty on gold: reduced from 15% to 6% in Union Budget 2024-25

Connection to this news: The proposed 6% initial band for gold and silver ETFs (vs 10% for equity ETFs) reflects SEBI's recognition that commodity prices can exhibit sharp intraday movements driven by global factors, requiring tighter controls while still allowing sufficient trading flexibility.

Key Facts & Data

  • ETF AUM in India: over Rs 7 lakh crore (2025)
  • Proposed equity/debt ETF price band: 10% (expandable to 20%)
  • Proposed gold/silver ETF price band: 6% (expandable to 20%)
  • Proposed overnight ETF price band: 5% (fixed)
  • EPFO investment in equity ETFs: approximately Rs 2 lakh crore
  • Gold ETF AUM: approximately Rs 40,000 crore
  • Public comments deadline: March 6, 2026
  • SEBI Act: 1992; SEBI (Mutual Funds) Regulations govern ETFs