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RBI-Fifth Tranche of Sovereign Gold Bonds to open on September 01, 2016
August, 30th 2016

The Reserve Bank of India, in consultation with the Government of India, has decided to issue fifth tranche of Sovereign Gold Bonds. Applications for the bond will be accepted from September 01, 2016 to September 09, 2016. The Bonds will be issued on September 23, 2016. The Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange.

The features of the Bond are:

Sl. No. Item Details
1. Product name Sovereign Gold Bond 2016-17 – Series II
2. Issuance To be issued by Reserve Bank India on behalf of the Government of India
3. Eligibility The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions
4. Denomination The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram
5. Tenor The tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates
6. Minimum size Minimum permissible investment will be 1 gram of gold
7. Maximum limit The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained
8. Joint holder In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only
9. Issue price Price of Bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period
10. Payment option Payment for the Bonds will be through cash payment (upto a maximum of ₹ 20,000) or demand draft or cheque or electronic banking
11. Issuance form Government of India Stock under GS Act, 2006. The investors will be issued a Holding Certificate. The Bonds are eligible for conversion into demat form
12. Redemption price The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.
13. Sales channel Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices (as may be notified) and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.
14. Interest rate The investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment.
15. Collateral Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
16. KYC documentation Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.
17. Tax treatment The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual has been exempted. The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.
18. Tradability Bonds will be tradable on stock exchanges/ NDS-OM within a fortnight of the issuance on a date as notified by the RBI.
19. SLR eligibility The Bonds will be eligible for Statutory Liquidity Ratio purposes.
20. Commission Commission for distribution of the bond shall be paid at the rate of 1% of the total subscription received by the receiving offices and receiving offices shall share at least 50% of the commission so received with the agents or sub agents for the business procured through them.

It may be recalled that Honourable Finance Minister had announced in Union Budget 2015-16 about developing a financial asset, Sovereign Gold Bond, as an alternative to purchasing metal gold. Accordingly, four tranches of issuances have so far been undertaken during 2015-16 and 2016-17.

Alpana Killawala
Principal Adviser

Press Release : 2016-2017/531

 
 
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