Govt may discontinue sovereign gold bond scheme: Report
Investors more than doubled their invested money, payable from the govt's pocket, on the first four tranches issued between 2015 and 2017
The Union government may discontinue the sale of sovereign gold bonds (SGBs) as they are considered an “expensive and complex” instrument.
Investors more than doubled their invested money, payable from the government's pocket, on the first four tranches issued between 2015 and 2017, said a CNBC-TV18 report.
Bonds are a form of debt instrument which a government or a corporation can use to raise money for a particular requirement.
“Bond investors put in Rs 72,274 crore in 67 segments or tranches of SGB. Four out of the 67 have fully matured and the money has been sent back to the investors who bought the bonds,” said the report.
The recent Union Budget highlighted that the government owes Rs 85,000 crore to investors, which is almost nine times the Rs 10,000 crore it owed at the end of March 2020.
Even though an official announcement is yet to be made, the markets seem prepared as the demand for gold bonds had increased in the secondary markets. Investors were willing to pay as much as 8% more than the trading price set by the government as of August 14, as per the report.
The sovereign gold bonds are listed in the secondary market and can be traded in cash segments on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) through investors’ demat accounts. According to the report, the profits made from the sale of the gold bonds through the exchanges will attract a capital gains tax.
What are sovereign gold bonds?
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The bond is issued by the Government of India.
It was introduced in November 2015 to restrain the rising imports of gold into the country at the time.
The SGBs are denominated in multiple grams of gold, with the unit set to one gram of gold. The gold bond has a holding period of eight years and an additional option for a premature withdrawal after the fifth year.
An individual investor can buy a minimum of 1 gram and a maximum of 4 kg in the gold bond. Hindu Undivided Families can buy up to 4 kg, and trusts and similar entities can buy 20 kg every financial year.