The government on Thursday said it will launch the next tranche of sovereign gold bonds on July 10 — the second time in this fiscal — offering a 2.5% annual interest to investors. Applications for the bond will be accepted from July 10 to July 14, according to the finance ministry. The bonds will be issued to eligible applicants on July 28. The investors will get the interest payable semi-annually on the nominal value of investment. The latest issuance of bonds is part of the government’s efforts to garner as much as Rs 5,000 crore from all the three gold schemes this fiscal. The sovereign gold bond, gold monetisation scheme and Indian gold coin were launched by Prime Minister Narendra Modi in late 2015, as the government wanted to discourage imports of the precious metal and curb their debilitating impact on trade balance. The gold schemes are still far from a roaring success though. The government had budgeted to mop up Rs 10,000 crore from the three schemes in 2016-17, but it had to settle for Rs 3,809 crore in the revised estimate that is equivalent of just around 2% of the country’s annual consumption. However, analysts have said the schemes provide more choices to investors and could potentially be a massive success if they are designed even better and once investors are made aware of their many benefits. In 2015-16, the mop-up was Rs 1,318 crore.
The bonds will be sold through banks, Stock Holding Corporation of India, designated post offices, the National Stock Exchange and the Bombay Stock Exchange. The tenor of the bonds will be for a period of eight years, with exit option from 5th year to be exercised on the interest payment dates, according to the statement.
Payment for the bonds will be through cash (but only up to a maximum of Rs 20,000) or demand draft or cheque or electronic banking. The issue price of the gold bonds will be Rs 50 per gram less than the nominal value, the finance ministry said.
As low as 1 gram of gold can be invested, with the maximum limit that can be subscribed by an entity fixed at 500 gram per person per fiscal. A self-declaration to this effect will be obtained. In case of joint holding, the investment limit of 500 gram will be applied to the first applicant only.
Investors have been exempted from any tax on capital gains from the redemption of such gold bonds. The indexation benefits will be provided to long-term capital gains arising to any person on transfer of bond. Bonds will be tradeable on stock exchanges from a date to be notified by the RBI.
The price of the bonds 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 for the week (Monday to Friday) preceding the subscription period.
The gold bonds can also be used as collateral for loans. The loan-to-value ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.