Gold bond scheme raises Rs 919 crore in 4th tranche, highest so far

The government has reaslied its highest revenue yet from the fourth tranche of the Sovereign Gold Bond Scheme. Open from July 18-22 this year, the fourth round raked up Rs 919 crore from investors.

“The amount realised through the 4th tranche is the highest achieved as yet. The previous round was Rs 746 crores in the third tranche when the issue price was only Rs 2,600 per gram of gold,” the Ministry of Finance said in a statement.

The SGB scheme was launched as an alternative to physical gold in November 2015 at an issue price of Rs 3,119 crore per gram of gold.

The top 5 among the receiving offices were State Bank of India, National Stock Exchange, Bank of India, ICICI Bank and HDFC Bank, in that order. The total subscription in first three tranches was Rs 1,318 crore corresponding to 4.9 tonnes of gold, the ministry said.

In an earlier ZeeBiz report, we'd stated that in the midst of macroeconomic uncertainty which includes Britain’s exit from the European Union, would make investors turn to safe haven like metals. However, the SGB scheme is aimed at reducing the demand for physical gold, including imports, to cut down on India’s Current Account Deficit (CAD).

> The fourth tranche of the SGB was the first series for 2016-17.

> To find more takers for the scheme, the government made several changes: 

> Resident individuals as well as institutional investors were allowed to invest in the scheme.

> The minimum subscription limit was reduced from 2 gram to 1 gram. 

> The Capital Gains Tax arising on redemption of SGB to an individual was exempted, in line with the Budget 2016-17 announcement. 

> The applications were allowed to be routed online and SGB was issued in Demat/ paper form. 

> National Stock Exchange and Bombay Stock Exchange were notified as additional receiving offices. Trading of Gold Bonds was also operationalised.

> The scheme provides an interest of 2.75% per annum, which is payable every six months on the initial investment.

> The maximum subscription, however, has been retained at 500 grams per individual/ institution.

“The encouraging response of the investors to the SGB Scheme (Series-I) of 2016-17, indicates that the product has come of age, and is becoming popular amongst the general public due to advantages it offers over physical gold, namely use as collateral for loans, Capital Gain Tax exemption on redemption, Zero risk of theft/ impurities associated with handling of physical gold; tradability through Stock Exchanges and also availability in Demat and paper form," the Ministry said. 

Looking at the encouraging response for the gold bond scheme, the government is expected to come up with more tranches in 2016-17,” it added.