Indian Asset Managers Pause Lump Sum Inflows into Silver ETF Funds; Here’s Why

Several Indian asset managers have temporarily stopped accepting new lump sum investments into their Silver ETF Fund-of-Funds as domestic silver prices surge well above international import parity. The move, seen as a protective step for investors, comes amid tight physical supply and inflated local premiums.

Silver ETF Inflows Paused amid Surging Domestic Premiums

From October 10-13, 2025, Kotak Mutual Fund, UTI Mutual Fund, and SBI Mutual Fund have each paused new lump sum and switch-in inflows into their respective Silver ETF FoFs. These decisions were prompted by domestic silver trading at 5-12% premiums over import-parity prices, far above the usual sub-1% range. With silver scarcity pushing local prices near ₹5,500 per ounce compared to an import-equivalent of about ₹5,000 per ounce, fund houses found it unsustainable to create new units without risking investor overpayment.

Under this scenario, Silver ETFs that rely on physical silver acquisition or in-kind creation face constraints in unit generation. The inflated premiums would distort indicative NAVs and potentially harm investors entering during the dislocation period.

Temporary Suspension across Leading AMCs

Kotak Mutual Fund stopped accepting lump sum or switch-in investments in Kotak Silver ETF FoF from October 10, while keeping SIP and STP routes open. UTI Mutual Fund followed suit on October 13, halting fresh subscriptions but allowing SIPs, STPs, and SWPs with certain limits. 

Similarly, SBI Mutual Fund suspended new lump sum investments in its SBI Silver ETF FoF effective October 13 while maintaining normal SIP, STP, and redemption operations.

High Premiums and Supply Constraints Drive Action

Industry estimates show silver at roughly $50 per ounce internationally, translating to about ₹5,000 per ounce in India post-duties and GST. However, local quotations have peaked around ₹5,500 per ounce, reflecting a 10-12% premium. 

This exceptional spread is attributed to limited supply, heightened industrial demand from solar and EV sectors, and festive-season jewellery buying. Fund houses describe these measures as temporary, intended to resume normal operations once premiums stabilise and physical availability improves.

Continuing Investment Routes and Market Impact

Despite the pauses, investors with ongoing SIPs, STPs, or redemption needs remain unaffected. The underlying Silver ETFs continue trading on exchanges, ensuring liquidity, though new unit creation remains constrained. These actions are designed to prevent investor entry at inflated NAVs rather than restricting long-term participation in the silver investment space.

Read More: Kotak Mutual Fund Halts Lumpsum Investments in Silver ETF FoF Amid High Premiums!

Conclusion

The temporary suspension of lump sum inflows into Silver ETF FoFs by leading mutual funds underlines the challenges posed by India’s current silver shortage and inflated premiums. By taking pre-emptive measures, AMCs aim to protect investor interests until market conditions normalise and fair pricing returns.

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