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The fourth tranche of Sovereign Gold Bond (SGB) scheme opened for subscription today, through which the government aims to attract a large number of investors to curb the demand for physical gold that is imported in large quantities draining the country’s foreign exchange.
The SGB issue price has been fixed at Rs 3,119 per gram.
An investor can invest for a minimum unit of one gram and a maximum of 500 grams. The subscription is open till July 22.
The first three tranches had attracted an investment of Rs 1,318 crore, equivalent to 4.9 tonnes of gold at the prices prevailing at those times. With the added features, it is expected that the fourth tranche of SGB would garner much higher investment.
SGBs can be purchased from stock exchanges NSE and BSE, all bank branches, select post offices and Stock Holding Corporation of India Ltd.
SGB — government securities denominated in grams of gold — offer an alternative to holding gold in physical form. The scheme was announced by the Government on October 30, 2015.
“Large number of investors and mutual fund players are set to benefit from National Stock Exchange electronic mutual fund platform which has started offering subscription to sovereign gold bonds,” NSE said in a statement.
SGB gives an interest of 2.75 per cent per annum, payable every six months on initial investment minus the risk of theft/loss or impurities associated with physical gold.
The bond can be converted into demat form and used as collateral for availing loans. It will be repayable after eight years from the date of issue and premature redemption is permitted after 5th, 6th and 7th years from the date of issue.
Funds raised through the bonds will form part of the government’s market borrowing programme.
Redemption of sovereign gold bonds by an individual is exempt from capital gains tax. It also provides that long-term capital gains arising to any person on transfer of sovereign gold bonds shall be eligible for indexation benefits.
India imports about 1,000 tonnes of gold every year and it is the second-biggest constituent of the import bill after crude oil.
Gold imports showed a decline of about 8 per cent to $31.72 billion in 2015-16 due to weak global prices and are expected to keep a lid on the country’s current account deficit. Gold imports stood at USD 34.38 billion in 2014-15.
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