Fourth tranche of Sovereign Gold Bond scheme opened for subscription

July 19, 2016

The fourth tranche of the Sovereign Gold Bonds (SGB) scheme opened for subscription.
SGB is government securities denominated in grams of gold. It offers an alternative to holding gold in physical form. The scheme was launched by the Union Government in October 2015.
Government has fixed 3,119 Rupees per gram as the issue price for the bond in this tranche. The scheme will be open till 22 July 2016.
Key Facts

The bond can be purchased from the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
Besides, all Bank branches and select Post Offices and Stock Holding Corporation of India Limited will also issue it.
In this tranche minimum subscription has been reduced to 1 gram and maximum at 500 gram per person or institution. Earlier, the minimum denomination was 5 gram.
The SGB bonds can be converted into demat form and can be used as collateral for availing loans. Redemption of SGB bonds by an individual is exempted from capital gains tax.
SGB gives an interest of 2.75 per cent per annum and is payable every six months on initial investment.
Government will use the funds raised through these bonds as part of its market borrowing programme.

Background

Through this scheme Government aims to attract a large number of investors to curb the demand for physical gold, mainly imported in large quantities leading to draining the country’s foreign exchange.
Thus it will keep a lid on the country’s current account deficit as gold imports are the second-biggest constituent of the import bill after crude oil.
The first 3 tranches of SGB Scheme had attracted an investment of 1,318 crore rupees, equivalent to 4.9 tons of gold at the then prevailing prices.

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