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Govt to launch sovereign gold bond scheme on Oct 9

Discount restricted; higher quantity investment allowed

Rajesh Bhayani  |  Mumbai 

Gold, gold bonds, SGBs

The government on Friday announced the issue of 2017-18 series-III, first time after the liberalisation of SGB schemes in July 2017. While the 2.5 per cent interest rate was retained, the pricing formula was re-aligned with the market price and the bonds’ tenure was expanded, as against the previously followed practice. 

Even the investment limit per individual has been increased to 4 kg from 500 grams. For members of the Hindu Undivided Family (HUF), the limit was fixed at 4 kg, while for trusts and similar entities a cap of 20 kgs was set for each financial year.

A discount of Rs 50 would be exclusively offered to online/ digital investors.

The government note further stated: “The 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 (IBJA), for the last three business days of the week preceding the subscription period.”

Since the price formula for bonds has been changed to 3, from an erstwhile average of 5 days based on the IBJA price for gold of 999 purity, the net bond price comes to Rs 2,956 per gram. However, a discount of Rs 50 that was earlier available to all bond investors has now been restricted.

“The issue price of the will be 50 per gram less for those who subscribe online and pay through the digital mode,” said the government note. This means that applicants who physically fill up forms and invest in banks will not be entitled to avail the discount.

New bonds issue will be opening on Monday (October 9) and will continue till December 27, this year, according to the government release.

“Applications for the bond will be accepted from October 9, 2017 to December 27, 2017,” stated the press note.

This is the longest period for which the bonds issue will remain open. However, a longer tenure and the new price formula have led to confusion, as the price announced before the issue will remain valid for around three months.  

Market experts raised concerned over certain mistakes in the government’s note, even as they wait for the Reserve Bank of India (RBI) to announce the price of the issue. They fear that the prolonged time of issue may lead to a situation where no one will invest money in the initial period.

Experts are, thus, expecting a correction or clarification from the authorities in this regard. Among the suggested changes is the decision to limit the period of the issue to October 27, in case the sale goes live on October 9.

Yesterday late night clarified that “the sovereign gold bond scheme will be open for subscription from Monday to Wednesday every week starting from October 09, 2017 until December 27, 2017. The settlement will be made on the first business day of the next week for the applications received during a given week."

Usually, the announces prices a day before the bond issue opens. As per formula, Monday bonds issue may be priced at Rs 2,956 per gram and those investing digitally will get bonds at Rs 2,906 per gram.

Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as notified by the

First Published: Sat, October 07 2017. 02:31 IST