Government to issue sixth tranche of Sovereign Gold Bonds

New Delhi, Oct 20 (IANS) The government here on Thursday announced the sixth tranche of Sovereign Gold Bonds, for which applications will be accepted from October 24 till November 2.

“The government, in consultation with the Reserve Bank of India (RBI), has decided to issue Sovereign Gold Bonds (SGB) 2016-17 – Series III. Applications for the bonds will be accepted from October 24, 2016, to November 2, 2016,” the Finance Ministry said in a statement.

The bonds will be issued on November 17, it said.

“The Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges — National Stock Exchange of India Ltd and Bombay Stock Exchange,” it added.

The government had earlier said that the sixth tranche of Sovereign Gold Bond is expected to rake in more than Rs 820 crore. The fifth tranche of these bonds had received over two lakh applications representing around 2.37 tonnes of gold.

The tenure 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.

Minimum permissible investment will be 1 gram of gold and the maximum amount subscribed by an entity would not exceed 500 gram per person per fiscal year (April-March). In case of joint holding, the investment limit of 500 gram will be applied to the first applicant only.

“Price of Bond will be fixed in rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd for the week (Monday to Friday) preceding the subscription period. The issue price of the Gold Bonds will be Rs 50 per gram less than the nominal value,” it said.

Payment for the Bonds will be through cash payment (up to a maximum of Rs 20,000) or demand draft or cheque or electronic banking.

“The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value of investment,” it said.

The central government launched the SGB Scheme as an alternative to investing in physical gold in November 2015.

The aim of SGB is to reduce demand, including through imports, for physical gold, and in process reduce India’s current account deficit.

The sustained and encouraging response of the investors indicates that the product has come of age, and is increasingly becoming popular due to advantages it offers over physical gold, namely used as collateral for loans, capital gain tax exemption on redemption, zero risk of theft/impurities associated with handling of physical gold; tradability through stock exchanges and also availability in demat and paper form.–IANS