The Government of India, in consultation with the Reserve Bank of India, has decided to issue third tranche of Sovereign Gold Bonds. Applications for the bond will be accepted from March 8, 2016 to March 14, 2016. The Bonds will be issued on March 29, 2016. The Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL) and designated post offices. The borrowing through issuance of the Bond will form part of market borrowing programme of the Government of India.
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, two tranches of issuances have been undertaken during 2015-16 so far. The features of the Bond are given below:
Sl. No
|
Item
|
Details
|
1
|
Product
name
|
Sovereign
Gold Bond 2016 – 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
5thyear to be exercised on the interest payment
dates.
|
6
|
Minimum
size
|
Minimum
permissible investment will be 2 units (i.e. 2 grams 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
|
Frequency
|
The Bonds
will be issued in tranches. Each tranche will be kept open for a period to be
notified. The issuance date will also be specified in the
notification.
|
10
|
Issue
price
|
Price of
Bond will be fixed in Indian Rupees on the basis of the previous week’s
(Monday–Friday) simple average of closing price of gold of 999 purity published
by the India Bullion and Jewellers Association Ltd.
(IBJA).
|
11
|
Payment
option
|
Payment for
the Bonds will be through cash payment (upto a maximum of Rs. 20,000/-) or
demand draft or cheque or electronic banking.
|
12
|
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.
|
13
|
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.
|
14
|
Sales
channel
|
Bonds will
be sold through banks, SCHIL and designated Post Offices, as may be notified,
either directly or through agents.
|
15
|
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.
|
16
|
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.
|
17
|
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.
|
18
|
Tax
treatment
|
The
interest on Gold Bonds shall be taxable as per the provision of Income Tax Act,
1961 (43 of 1961) and the capital gains tax shall also remain same as in the
case of physical gold.
|
19
|
Tradability
|
Bonds will
be tradable on exchanges/NDS-OM from a date to be notified by
RBI.
|
20
|
SLR
eligibility
|
The Bonds
will be eligible for Statutory Liquidity Ratio purposes.
|
21
|
Commission
|
Commission
for distribution of the bond shall be paid at the rate of 1% of the subscription
amount.
|
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