NEW DELHI: India’s top two exchanges — the Bombay Stock Exchange and the National Stock Exchange — will start trading in sovereign gold bonds from Monday after the Reserve Bank of India (RBI) and markets regulator Sebi cleared the new instrument recently, providing investors a greater choice to diversify their portfolio without the need to buy the metal in its physical form.
In separate statements, the exchanges said that the product will be launched in their cash segments. Investors already registered with the exchanges can start investing directly in the sovereign gold bond (SGBs) through their brokers, without the need of any additional documentation. “These SGBs will be traded under the “G” Group of equity cash segment of the BSE, along with other government securities available for trading and settled on T+2 basis in the demat account of the investors,” the BSE said.
The Sovereign Gold Bond Scheme was announced by the government on October 30, 2015. These bonds are issued by the Reserve Bank of India on behalf of the government. The minimum investment size in the secondary market will be as low as 1 gm. The tenure of the bond is eight years with an exit option from fifth year to be exercised on the interest payment dates.
The bonds will carry an interest rate of 2.75 per cent (fixed rate) per annum on the amount of initial investment.
Interest is to be paid half-yearly and the last interest will be payable on maturity, along with the principal. The product is accompanied with few beneficial tax features. Though the long term capital gains tax is applicable after three years and the same will be zero if redeemed after full maturity only.
The two exchanges have been appointed by Securities and Exchange Board of India for acting as receiving office for collecting subscription bids from investors. So far, three tranches of the bonds have been issued and the fourth tranche is expected soon.
RBI notified June 13 as the date for commencement of trading of SGBs issued in the first tranche. It will notify similar dates for the subsequent tranches later, all such bonds will be available on the exchanges for trading.
The third tranche, which was launched on March 8, received a lukewarm response with the government getting a subscription for 1,128 kg gold, amounting to Rs 329 crore—less than the half it got in the previous round. There were around 64,000 applicants.
The government had so far received subscription for 4,916.25 kg of gold amounting to about Rs 1,322 crore.
