Why India Froze Gold Funds

October 23, 2026

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Good Morning. India has shut the door on fresh investments in gold funds as it steps up efforts to defend the rupee. The move echoes measures taken during the 2013 currency crisis, even as officials insist the country’s external position remains manageable. What does this signal about the pressure on the rupee?

Indian benchmark indices ended lower on Thursday. The BSE Sensex closed at 73,249.39, down 460.30 points or 0.62%. The NSE Nifty50 closed at 22,687.65, down 123.70 points or 0.54%.

In other news, India's private capital expenditure pipeline has jumped to Rs 99.7 lakh crore in September. Meanwhile, India is boosting West Asia oil imports.

India’s Gold Fund Freeze Revives Memories Of 2013 Crisis

What?

Late on October 15, fund houses issued notices suspending lump sums, switch-ins, new SIPs and SIP top-ups in their gold fund-of-funds (FoFs).

By Friday, 17 fund houses had curbed 20 schemes, by the count of Cofacto, an independent markets newsletter. Existing SIPs and redemptions continue, “until further notice”.

The freeze targets FoFs because a gold FoF hands its money to the fund house, which creates new ETF units and buys fresh gold to back them. SEBI has not commented publicly.

The official line is that India’s external position is manageable, with a current account deficit of just 0.5% of GDP and reserves covering about 11 months of imports.

Yet since March, the RBI has sold a net $9.76 billion, the Prime Minister has urged Indians not to buy gold for weddings for a year, customs duty on gold has gone from 6% to 15%, and the RBI raised its policy rate by 25 basis points to 5.50%, its first hike since 2023.

What The Freeze Saves

The small deficit hides the pressure. In Q1 FY27, net capital outflows of $5.8 billion came on top of the deficit, and reserves fell by $8.1 billion, ICRA notes.

Each swapped deposit obliges the RBI to hand dollars back later, and its net forward dollar liabilities hit a record $200 billion in August, Reuters reported.

The freeze saves less than its reach suggests. Cofacto puts the ceiling on what this year’s curbs could keep out at 10 to 20 tonnes, about $1.6 billion per 10 tonnes.

The saving will also leak, most of all into physical gold. Money turned away from funds can still buy coins, bars and jewellery, all of it imported metal and harder to count. Some money will move to ETFs on the exchange instead, where prices can run above iNAV while few new units can be made.

A measure imposed by unpublished instruction cannot be judged or planned around. So where does the money go next, who pays the premium on the shut door, and how long can “until further notice” last before “manageable” stops being believable?

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Rs 99.7 lakh crore

That’s how much India's planned private sector investments rose in September 2026, led by IT-enabled services and conventional power projects, according to a report by Union Bank of India (UBI) Research.

Fast Facts: The investment pipeline has grown 87% over two years, while the number of projects increased by only 18%.

IT-enabled services and conventional power accounted for 87% of the annual increase, adding Rs 16.8 lakh crore and Rs 7.6 lakh crore, respectively.

The report noted that the rise was driven largely by bigger projects rather than a broad-based recovery.

Maharashtra led with planned projects worth Rs 28.6 lakh crore, around 29% of the total.

Forecast: UBI Research flagged concerns over project execution and infrastructure gaps in the power sector.

Planned investments in power generation stood at Rs 32 lakh crore, compared with just Rs 0.17 lakh crore for transmission.

The report said banks should carefully assess project feasibility, funding needs and power evacuation arrangements before approving loans.

India Boosts West Asia Oil Imports

India's crude oil imports from the West Asia rose to their highest level since February in September, as refiners increased purchases from Gulf producers and reduced Russian oil imports amid stronger competition with China, ship-tracking data showed, Reuters reported.

By The Numbers: West Asia crude imports climbed to about 2.8 million barrels per day in September, with Gulf supplies accounting for around 54% of India's total oil purchases.

The increase followed higher shipments through the Strait of Hormuz, easing supply constraints caused by the Iran war.

Meanwhile, Russian oil imports fell 14% month-on-month to about 1.8 million barrels per day, reducing Russia's share of India's purchases to 33.5% from 46.6% in August.

Forecast: Russian oil purchases are likely to remain subdued as their delivered cost has become comparable to some West Asian grades, particularly Iraqi crude.

Discounts on Russian oil have narrowed to $1-$2 per barrel against Brent, from more than $10 in recent months.

Shorter shipping times and lower selling prices offered by some West Asian producers have also made Gulf supplies more attractive.

eMudhra to Exit Global Digital Certificate Business

Indian digital trust services provider eMudhra will voluntarily exit its global digital certificate business after security weaknesses were found in certificates it issued.

The discovery prompted major web browsers to block its certificates and raised concerns about online safety and privacy, Reuters reported.

Background: An independent cybersecurity researcher found that several certificates issued by eMudhra had weaknesses that could put websites, software and online communications at risk.

Google, Mozilla, Apple and Microsoft blocked the company's certificates. India's Computer Emergency Response Team also warned that some certificates had been compromised.

eMudhra said it had withdrawn eight certificates, adding that its systems had not been hacked and no data had been leaked.

Flashpoint: Digital certificates help protect information shared between websites and users. They are also used by some public services, including India's income tax portal.

eMudhra said its global digital certificate business contributed just 1% of its total revenue and that the attention surrounding the incident was out of proportion to the business's importance.

eMudhra's shares fell 40% over two days after the security weaknesses came to light.

Coal Gasification Hinges On Policy

India could avoid Rs 1.96 trillion in annual industrial imports by developing a domestic coal gasification ecosystem, consultancy Alvarez & Marsal said in a report released Thursday. The technology converts coal into value-added products such as natural gas, urea, ammonia and methanol, reducing exposure to global price volatility.

Background: The push comes as India faces rising electricity demand and pressure on coal supplies, with 96 power plants reporting critically low stocks as of October 19, Reuters reported. Daily coal deliveries have reached a record 2.6 million tonnes, a power ministry official said.

Pivot: The government envisages Rs 2.5-3 trillion in gasification investments and 50,000 jobs. However, the sector requires policy support, faster clearances, financial incentives and domestic technology development.

Silver Imports Meet Weak Demand

India has issued fresh silver import permits covering up to 6,000 tonnes, easing supply constraints ahead of the festive season and Diwali on November 8. The six-month licences are expected to meet a seasonal demand spike and lower premiums, Bloomberg reported. Premiums fell to around 50 cents an ounce above global prices on Thursday, from $2 last week.

Why It Matters: In mid-May, India immediately restricted nearly all silver imports. It further tightened these regulations in June by adding silver grain and powder to the restricted list and requiring prior import authorisation.

To ease pressure on the rupee and foreign exchange reserves, India raised import duties on gold and silver to 15%, though dealers were surprised by a higher six-month import allocation given weak domestic silver demand.

What's Next? Demand is expected to remain below last year’s levels, as subdued retailer stocking and investor losses dampen buying despite a sharp correction in global silver prices.

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On Episode 1013 of The Core Report, financial journalist Govindraj Ethiraj talks to Dinesh Kanabar, Founder, Chairman & CEO of Dhruva Advisors. We also feature an excerpt from our recent Special Edition featuring Jitendra Gohil, CFA, CIO – Listed Equities at Bajaj Alternate Asset Management Limited.

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