Silver mutual fund schemes and exchange-traded funds (ETFs) are facing a short supply of silver following government restrictions on imports. Import permits must now be obtained from the Directorate-General of Foreign Trade (DGFT), causing silver ETFs to increase by 4 percent to 0.24 percent on the stock exchange, despite declining prices in domestic markets.
Silver prices dipped slightly to ₹268,040 per kg, down from ₹268,500 over the weekend, according to data from the Indian Bullion and Jewellers Association of India.
MFs Report Outflow
Despite the increased demand for silver ETFs, mutual funds (MFs) have experienced a net outflow from silver funds in recent months. This trend suggests that equity investors are diversifying their portfolios to capitalize on a potential rise in domestic silver prices due to anticipated shortages.
Currently, silver ETFs are trading below the indicative Net Asset Value (i-NAV) set by MFs, with domestic silver prices reflecting a discount of approximately $1.50 to $2 per ounce. Satish Dondapati, Fund Manager at Kotak Mahindra AMC, indicated that the import restrictions may gradually support Indian silver prices over the coming months.
“Silver had already risen sharply in recent weeks because of the duty increase, prompting some investors and traders to book profits in the last 2-3 sessions. Much of the positive impact has already been accounted for in earlier prices,” he mentioned.
Import Duty Hike
The DGFT announced this past Saturday that the import policy for silver, including items plated with gold and platinum, has shifted from “free” to “restricted,” effective immediately. Goods categorized as “restricted” may only be imported with a valid government-issued license.
These latest restrictions follow the government’s recent increase in import duties on precious metals, raising rates from 6 percent to 15 percent. This new structure includes a 10 percent basic customs duty along with a 5 percent Agriculture Infrastructure and Development Cess. India’s silver imports surged to over $12 billion in the fiscal year 2026, a 150 percent increase from the previous year.
Following significant inflows of ₹3,962 crore and ₹9,463 crore in December and January, respectively, silver mutual funds have seen a steady net outflow of ₹1,637 crore over the last three months, as earlier investors capitalized on falling prices.
Redirecting Supply
Renisha Chainani, Head of Research at Augmont, stated that the government is deliberately shifting India’s silver supply chain away from import reliance towards domestic refining, thereby alleviating current account deficit pressure.
“The market will adjust, which will neither be quick nor painless. Silver market participants must now navigate a fundamentally different regulatory and supply landscape than existed even two weeks ago,” she explained.
Silver prices have decreased over 35 percent since reaching a peak of over $121 per ounce on January 29 this year, currently trading at $77.70 per ounce. Notably, silver has seen an almost 9 percent increase this year, slightly outpacing gold, which has risen by 5.5 percent.
Published on May 18, 2026
