NSE will allow trading in the first tranche of Sovereign Gold Bond Scheme on its platform from Monday (June 13). The government has collected Rs 1,322 crore by issuing bonds for 4,916.253 kg of gold. The tenor of the bond is eight years with a put option available after five years.

The bond will be available for trading in the cash segment of NSE to ensure wider reach, ease of trading and do away with additional procedure for regular investor to buy and sell gold.

Minimum investment size in the secondary market will be one gram. Reference price for trading will be the price of gold (0.999 purity) published by the Indian Bullion and Jewellers Association.

Investors will get returns linked to gold price. Additionally a fixed interest rate of 2.75 per cent per annum will be paid every six months. The bonds will carry sovereign guarantee both on redemption amount and interest payable. The fourth tranche of gold bond is expected by end of this month.

The Reserve Bank of India and SEBI cleared trading in the gold bond recently. NSE was also appointed as 'Receiving Office' for collecting subscription bids from investors.

The sovereign gold bond scheme was launched in November to reduce the demand for physical gold and shift a part of the domestic savings used for purchase of gold into financial savings.

Huzan Mistry, Strategic Business Head- Currency & Fixed Income, NSE, said the exchange expects large retail acceptance of the gold bond as it is a better substitute for physical gold.

“We expect the product to work well keeping in mind NSE’s retail distribution capabilities,” Mistry added.

The product also has a few tax benefits including long term capital gains tax after three years and no TDS (tax deducted at source) on interest accrued. This apart, the investment can also be used as collateral for bank loans.

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