Gold & Silver

Will the Sovereign Gold Bond scheme gain some sheen this year?

Rajalakshmi Nirmal BL Research Bureau | Updated on June 06, 2019 Published on June 05, 2019

In 2016-17, SGB issues raised a total of ₹3,451.5 crore; this dropped to ₹1,872.7 crore in 2017-18 and to a mere ₹643.3 crore in 2018-19.

The issue closes tomorrow

The Sovereign Gold Bond (SGB) Scheme 2019-20 - Series I is now open for subscription. The issue, which is open till June 7, is priced at ₹3,196/gm (the last issue in 2018-19 was priced at ₹3,326/gm). Those buying online will get a discount of ₹50/gm.

Many had expected the issue to open during Akshaya Tritiya in May.

The delay in the first issue of the year was because of the general elections, say observers. But it also looks like the Centre is losing interest in pushing its once favourite scheme as public demand for the product has been falling.

In 2016-17, SGB issues raised a total of ₹3,451.5 crore; this dropped to ₹1,872.7 crore in 2017-18 and to a mere ₹643.3 crore in 2018-19.

The main reason for this is the lacklustre movement in gold prices.

The yellow metal has seen prices move in the $1,200-1,300/ounce band for the past five years with the compounded annual return for the period being just about 2 per cent. Thanks to the rupee’s depreciation, Indian gold investors saw slightly better returns.

Since the first issue of SGBs in India in 2015, a total of 27 SGBs have been issued; they have collected a total of ₹7,285.7 crore, translating to 24.8 tonnes of gold.

However, with gold prices seeing an uptrend over the past week with rising geo-political tensions, the current issue of SGB may see some interest. If you miss the current issue, you can buy the ones in the coming months, too.

The RBI has released a calendar for the issue of these bonds till September. The dates are: June 3- 7, July 8-12, August 5-9, and September 9-13.

Though these bonds get listed in the stock exchanges post the issue, the buying process in the secondary market is not as simple.

One, there is not much liquidity across all bonds. So, you will not get as many bonds as you want in one go. Further, inter-depository transfer has not been happening.

Despite the central bank allowing it, the depositories haven’t sorted out the operational challenges.

If the client who buys these SGBs has her de-mat account with a depository different from that of the broker, the units cannot be transferred from the broker’s account to the client’s.

Some brokers let clients buy SGBs online only if they have both NSDL and CDSL de-mat accounts.

Published on June 05, 2019
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