Govt announces second tranche of sovereign gold bonds
15 January 2016
The government has decided to issue second tranche of sovereign gold bonds as part of its borrowing programme. Applications for the bonds will be accepted from 18 January to 22 January and the bonds will be issued on 8 February 2016.
The bonds, to be issued in consultation with the Reserve Bank of India. will be sold through banks, Stock Holding Corporation of India Limited (SHCIL) and designated post offices.
The borrowing through issuance of the bond will form part of market borrowing programme of the government of India, an official release said on Thursday.
The Sovereign Gold Bond 2016, to be issued by the Reserve Bank India, will be sold to resident Indian entities, including individuals, HUFs, trusts, universities and charitable institutions.
The bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
The tenor of the bond will be for a period of eight years with exit option from fifth year to be exercised on the interest payment dates.
Minimum permissible investment will be two units (ie, two grams of gold) and the maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.
In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.
The bonds will be issued in tranches. Each tranche will be kept open for a period to be notified. The issuance date will also be specified in the notification.
The price of the bond will be fixed in Indian rupees on the basis of the previous week's (Monday – Friday) simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd (IBJA).
Payment for the bonds will be through cash payment up to a maximum of Rs20,000 or demand draft or cheque or electronic banking.
The bonds will be government of India stock under GS Act, 2006. The investors will be issued a holding certificate. The bonds are eligible for conversion into demat form.
The redemption price will be in rupees based on previous week's (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.
Bonds will be sold through banks, SCHIL and designated post offices, as may be notified, either directly or through agents.
The investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment.
These bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as voter ID, Aadhaar card / PAN or TAN / passport will be required.
The interest on gold bonds will be taxable as per provisions of the Income Tax Act, 1961 (43 of 1961) and capital gains tax will remain same as in the case of physical gold.
Bonds will be tradable on exchanges / NDS-OM from a date to be notified by RBI.
The bonds will be eligible for Statutory Liquidity Ratio of banks.
Commission for distribution will be paid at the rate of 1 per cent of the subscription amount.
Finance minister Arun Jaitley has asked all banks to make their best efforts to reach out to potential investors to invest in the second tranche of the Sovereign Gold Bonds, which will be kept open from 18 to 22 January 2016.
Addressing the CMDs of the banks through video conferencing on Thursday, the finance minister also discussed the banks' preparedness for the second tranche of the Sovereign Gold Bond Scheme. He said that the government is keen to expand the scheme in the subsequent tranches as well.
At a review meeting by Shaktikanta Das, secretary, Department of Economic Affairs (DEA), with CMDs of the banks, all the banks assured to activate their branch network to inform the investors about the advantages of the bonds.
To increase the awareness among depositors, the government is continuing with the media campaign on AIR and FM radio, in print media and through mobile SMS campaign.
The first tranche of Sovereign Gold Bond (SGB) was issued by RBI at the branches of scheduled commercial banks and designated post offices through its e-kuber system from 5 November 2015 to 20 November, 2015. A total of 62,169 applications were received for a total subscription of 915.953 kg of gold amounting to Rs246.20 crore by the banks and post offices.