RBI fixes gold bond issue price at Rs2,684 per gram

The Reserve Bank of India (RBI) has fixed the issue price of Sovereign Gold Bonds at Rs2,684 per gram, and the bonds will be issued on 26 November.

''The issue price of the sovereign gold bond for this tranche has been fixed at Rs2,684 per gram of gold,'' the RBI said in a statement today.

The rate has been fixed on the basis of simple average of closing price for gold of 999 purity of the previous week (26-30 October 2015) published by the India Bullion and Jewellers Association Ltd (IBJA), the RBI added.

The gold bonds will offer investors an interest rate of 2.75 per cent and a choice to buy bonds worth 2 grams of gold, with a maximum limit of 500 grams.

The sale of bonds will be restricted to resident Indian entities, including individuals, HUFs, trusts, universities, charitable institutions.

The bonds will be denominated in multiples of gram(s) of gold with a basic unit of one 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 2 units (ie, 2 grams of gold).

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.

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 electronic funds transfer / cash payment / cheque / demand draft.

The bonds will be issued under the government of India stock (GS) Act, 2006. The investors will be issued a stock / holding certificate. The bonds are eligible for conversion into demat form.

The redemption price will be in Indian rupees based on previous week's (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.

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.

The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961) and the capital gains tax shall also 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 consideration as Statutory Liquidity Ratio of banks.

The commission for distribution will be paid at 1 per cent of the subscription amount.

Applications for the bond will be accepted from 5 November 2015 to 20 November 2015. The bonds will be sold through banks and designated post offices as may be notified.

The borrowing through issuance of the bond will form part of market borrowing programme of Government of India.

Aimed at providing an alternative to buying physical gold, this is the first tranche of the gold bond scheme and subsequent tranches would be notified later.

The tenor of the bond will be for a period of eight years with exit option from 5th year to be exercised on the interest payment dates, the statement said.