First in 2018-19: Gold bond new tranche from Monday

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New Delhi | Published: April 14, 2018 5:05:30 AM

Applications for the bond will be accepted from April 16 to April 20, the finance ministry said in a statement. Bonds will be issued to eligible applicants on May 4. Investors will get the interest payable semi-annually on the nominal value of investment.

The government said on Friday it will launch the first tranche of sovereign gold bonds for the current fiscal on April 16, offering a 2.5% annual interest to investors. (PTI)

The government said on Friday it will launch the first tranche of sovereign gold bonds for the current fiscal on April 16, offering a 2.5% annual interest to investors. 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 same as 2017-18 (revised estimate). Applications for the bond will be accepted from April 16 to April 20, the finance ministry said in a statement. Bonds will be issued to eligible applicants on May 4. Investors will get the interest payable semi-annually on the nominal value of investment. 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 import of the precious metal and curb its damaging impact on trade balance. The gold schemes are, however, still far from a roaring success. The government had budgeted to mop up Rs 10,000 crore from the three schemes in 2016-17, but could raise only Rs 3,451 crore, which was equivalent of just around 2% of the country’s annual consumption.

Analysts, however, have said the schemes provide more choices to investors and could potentially be a massive success if designed better and once investors are made aware of their benefits. Of the two big schemes, gold bond has been more popular than the monetisation scheme (the government mopped up just around 15-20 tonne under the monetisation scheme since its launch in November 2015, according to industry estimates). So the government seems to be focussing more on the bond scheme. While the interest is taxable, investors have been exempted from any tax on capital gains from 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 tradable on the stock exchanges within a fortnight of the issuance, on a date to be notified by the Reserve Bank of India. Bonds will be sold through banks, Stock Holding Corporation of India, designated post offices, the NSE and the BSE. The tenure of bonds will be for a period of eight years, with exit option from the fifth year, to be exercised on the interest payment dates. The issue price of 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 individual or Hindu undivided family fixed at 4 kg per fiscal. A self-declaration to this effect will be obtained. In case of joint holding, the investment limit of 4 kg will be applied to the first applicant only. However, for trusts and similar entities, the limit can be 20 kg per fiscal. Payment for bonds will be through cash (but only up to a maximum of Rs 20,000) or demand draft or cheque or electronic banking. Bonds acquired by banks through the process of invoking lien/hypothecation/pledge shall be counted towards the statutory liquidity ratio. The issue price of bonds will be fixed in rupees on the basis of a simple average of closing price of gold (999 purity), published by the India Bullion and Jewellers Association for three working days of the week preceding subscription. The redemption price, too, will be arrived at using the same formula. 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.

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