Mumbai, July 22 -- India's markets regulator is preparing a sweeping change in how gold and silver exchange-traded funds (ETFs) are valued, a move that could significantly alter pricing norms for a fast-growing segment of the country's mutual fund industry.

The Securities and Exchange Board of India has proposed replacing the long-used London Bullion Market Association benchmark with domestic spot prices, aiming to simplify fund valuation and better align it with local market dynamics. The proposal, laid out in a consultation paper dated 16 July, has drawn a mix of cautious support and sharp scepticism from asset managers and industry bodies.

Assets under management in Indian gold ETFs stood at Rs.64,777 crore ($7.5 billion) as of June,...