Alternative Investment
Sovereign Gold Bonds: What the Pricing Shows
Second tranche priced to attract investors
 
The Reserve Bank of India (RBI) had fixed the public issue price of sovereign gold bonds (SGB) at Rs2,684 per gram (gm) for the first tranche of subscription (from 5 November to 20 November 2015). It got subscriptions for only 915.95kg of gold amounting to Rs246 crore. One of the reasons for the lukewarm investor response was the...
Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MAS member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
Gold monetisation scheme: Banks to get 2.5 percent commission
New Delhi : The government will pay banks a 2.5 percent commission for mobilising gold under the gold monetisation scheme and depositors will be permitted premature withdrawal of the precious metal deposited, an official statement said on Sunday.
 
“The banks would be getting a 2.5 percent commission for the scheme which will include the charges payable to the collection and purity-testing Centres/Refiners," the finance ministry said in a statement on the gold monetisation scheme.
 
"It is expected that the modifications will make the scheme more attractive for potential depositors," it said. 
 
As per the revised guidelines, the government will pay participating banks a fee services like gold purity testing, refining, storage and transportation on medium and long term gold deposits.
 
Premature redemption have been now permitted under medium and long-term government deposits.
 
The monetisation scheme encourages individuals, households and temples to deposit gold jewellery or bars with banks or collection agents. The gold deposited would be later refined for domestic purpose and would help cut dependence on imports.
 
"Any Medium Term Deposit will be allowed to be withdrawn after three years and any Long Term Deposit after five years. These will be subject to a reduction in the interest payable," the statement said.
 
Besides, gold depositors can now give the metal directly to the refiner, instead of only through the Collection and Purity Testing Centres (CPTCs). 
 
"This will encourage the bulk depositors, including institutions, to participate in the scheme," the statement added.
 
The finance ministry said the gold monetisation scheme, launched by Prime Minister Narendra Modi last November, provides for tax exemptions on interest earned on the gold deposited and exemption from capital gains made through trading or at redemption.
 
Bureau of Indian Standards (BIS) has modified the licensing condition for refiners from the existing three years of refining experience to one year towards making the scheme more attractive, it added. 
 
"BIS has published an Expression of Interest (EOI) on its website inviting applications from more than 13,000 licensed jewellers to act as a CPTC in the scheme, provided they have tie-up with BIS licensed refiners," the statement added.
 
The government has mobilised around 900 kg of gold in over two-and-a-half months' time through the scheme, which pays depositors interest of up to 2.50 percent per annum.
 
In an effort to make the scheme more customer-friendly, the Reserve Bank of India (RBI) said earlier this week that depositors will be able to withdraw medium-term (5-7 year) and long-term government deposits (12-15 years) pre-maturely after the minimum lock-in period, albeit with a penalty.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

COMMENTS

Nanda Patel

2 years ago

banks get 2.5%(at a go) and you as a depositor get 2.5% a year and taxable!

do you really want to take a change. what if government changes the rules after you make your gold deposit.

Look at PSU.. why would one take that huge of risk.

MG Warrier

2 years ago

The quick response from GOI and RBI to stakeholders’ sentiments make the chances of survival and success of the three gold schemes under implementation (Sovereign Gold Deposit Scheme, Gold Monetisation Scheme and Gold Coin Scheme) brighter. After decades of hesitant approach to gold management, India is now exhibiting the country’s determination to exploit the past savings idling in the lockers of families, institutions and religious centres, and bring them to the mainstream economy, to which gesture, people are responding positively.
The initiative taken by GOI to exploit the potential of domestic gold stock to country’s advantage, if pursued with will and determination, will have a great impact on the growth story of India. When credibility in the government’s ability to manage country’s resources without leakages is restored, temples and other institutions with whom large stock of the yellow metal lie idle will plough it back to mainstream economy. That is their interest also.
Centre is yet to institutionalise a system to manage country’s gold stock. Let us wait for the Budget 2016-17, for a formal announcement on this. RBI should quickly revisit the 1990’s proposal to establish a Gold Bank which can, as an apex body, coordinate the demand and supply sides of gold management professionally.

Second edition of gold bond scheme opens
The second edition of sovereign gold bond scheme opened for subscription by resident Indians for five days from Monday, with the value of the commodity fixed at Rs.2,600 per gram of 99.9 percent purity, and an interest rate of 2.75 percent per annum.
 
"The bonds shall be denominated in units of one gram of gold and multiples thereof. The minimum investment in the bonds shall be two grams with maximum limit of subscription of 500 grams per person per fiscal year," the Reserve Bank of India, said announcing the launch.
 
"The scheduled commercial banks, designated post offices and the Stock Holding Corp of India are authorised to receive applications for the bonds either directly or through agents," the central bank added in the statement.
 
These bonds will be repayable on the expiry of eight years from February 8, which will be taken as the the issue date. Pre-mature redemption is permitted from the fifth year. The price taken for redemption will in rupees, taking into account the the previous week’s average.
 
Finance Minister Minister Arun Jaitley had underscored in his federal budget for 2015-16 the need to develop a financial asset ike the gold bond as an alternative to people purchasing metal gold. The first tranche was open for subscription from November 5-20. 
 
The government claimed thereafter that the the response was excellent -- 62,169 applications were received for a total subscription of 915.953 kg gold, amounting to Rs.246.20 crore by banks and Post Offices. 
 
Highlights of the scheme in its second edition:
 
- Issue price fixed at Rs.2,600 per gram of 99.9 percent purity
 
- Maximum subscription is 500 grams per person per fiscal 
 
- Minimum subscription two grams and in multiples of one gram, thereafter
 
- Rate of interest for 2015-16 fixed at 2.75 per annum payable half-yearly
 
- Bonds in both in demat and paper form
 
- Availability at designated banks and post offices
 
- Tenor of eight years, with exit option from 5th year
 
- Exemption from capital gains tax available. 
 
- On maturity, investor to get equivalent value of gold invested at then prevailing price
 
- Bonds may be used as collateral for loans
 
- Bonds can also be traded from such date as may be notified by central bank.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Online Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine)