The government mop-up through the sovereign gold bond has plunged 50 per cent to ₹6,551 crore in the financial year ended March against ₹12,991 crore loggedprevious year largely due to soaring gold prices amid high inflation.
The Government had raised ₹1,982 crore in its latest tranche in March at an issue price of ₹5,611 per gram against ₹5,409 per gram fixed for the previous tranche.
Since FY’16, the government had raised ₹45,243 crore through 63 tranches of SGB which are government securities denominated in grams of gold. These are alternatives for physical gold. The bonds are issued by the Reserve Bank of India on behalf of the Government.
Even while issuing SGB, the RBI had bought 3 tonnes of gold in February, taking its total gold reserves to 790 tonnes, according to the World Gold Council data. Total outstanding SGB as of date is 101 tonnes, about 13 per cent of gold reserves.
Deepak Jasani, Head of Retail Research, HDFC Securities said though gold buying by RBI is primarily to provide a safety buffer, the decision regarding accumulation of gold reserves will also be influenced by SGBs given its size.
With Gold fund and ETFs losing its indexation benefits investment in sovereign gold bond are more attractive especially on taxation front. However, long tenure of 8 years and low liquidity in few tranches of SGBs trading at discount to gold prices would keep few investors away from this investment option, he said.
Sachin Jain, Analyst, ICICIdirect said SGBs remain the best way to take exposure to gold due to additional 2.5 per cent per annum interest and no capital gains tax besides there are no annual recurring expenses as well.
Gold imports decline
With the gold prices hitting a new high, analysts are expecting a redemption of up to ₹1,500 crore of SGBs in this fiscal.
Narinder Wadhwa, National President, the Commodity Participants Association of India said ever since the launch of SGB, gold imports into India have decreased from 1,136 tonnes in FY’16 to 706 tonnes in FY’22.
The fall in gold imports has helped the country conserve foreign exchange and reduced the current account deficit easing concern of policymakers, he said.