17 July, New Delhi
The Ministry of Finance launched the fourth Tranche of Sovereign Gold Bonds (SGB) for resident individuals and institutional investors. The bonds will be open for investment from July 18 to 22.
The fourth tranche of the SGB scheme is the first series in 2016-17. Based on average of last week prices of physical gold, the issue price of the 4th tranche has been fixed at 3119 per gram of gold.
The SGB was announced in the 2015-16 Budget with a view to reduce the demand for physical gold, divert savings into financial instruments and to further narrow the current account deficit in the process.
The government offered bonds are a physical gold plus since it also gives an interest of 2.75 percent per annum, payable every six months on initial investment and does this without the attendant risk of theft/ loss or impurities associated with physical gold.
The investment in SGB is also eligible investment for Statutory Liquidity Ratio of Banks. The SGB is eligible to be converted into Demat form and can be used as collaterals for availing loans.
The SGB shall be repayable on the expiration of eight years from the date of the issue and premature redemption is permitted after fifth, sixth and seventh years from the date of issue of SGB.
To attract small investors, the minimum subscription has been reduced to one gm, although the maximum remains at 500 gm per person/institution.
Further, the SGB is also exempt from capital gains tax on redemption. Indexation benefit will also be available to long-term capital gains on transfer of bond.
Further, the SGB can now be purchased from NSE and BSE, besides all Bank branches, select Post Offices and the Stock Holding Corporation of India Ltd. (SHCIL).
The RBI has already made the first tranche of SGB tradable and the other tranches, including the present one, are expected to become tradable in three months’ time.
The first three tranches had attracted an investment of Rs. 1318 crore, equivalent to 4.9 metric tons of gold at the then prevailing prices.
With the added features, it is expected that the fourth tranche of SGB would garner much higher investment.