MF distributors allowed subscription of Sovereign Gold Bonds

Top stock exchange BSE has decided to permit mutual fund distributors to subscribe to sovereign gold bonds issue for their respective clients, through the bourse's mutual fund platform.

The 5th tranche of sovereign gold bonds will open from tomorrow up to September 9.

"Sovereign gold bond scheme (SGB) will be open for subscription on BSE StAR MF Platform from tomorrow September 1, 2016, to Friday September 9, 2016 for mutual fund distributors (MFDs) to subscribe to the issue for their client," BSE said in a circular today.

"The facility shall be available only on BSE StAR MF Web Portal and shall be available for transaction in demat mode," it added.

The Finance Ministry had yesterday said that applications for the bonds will be accepted from September 1 for nine days and the bonds will be issued on September 23.

The SGBs will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges -- NSE and BSE.

As the government securities denominated in grams of gold, SGBs offer an alternative to holding gold in physical form. The scheme was announced by the government on October 30 last year.

To improve attractiveness of the scheme, new features were introduced in the fourth instalment, where the minimum subscription limit was brought down to 1 gm, from 2 gm.

The maximum amount subscribed by an entity cannot be more than 500 grams per person per fiscal.

The product earns an interest rate of 2.75% per annum, payable half yearly on initial investment.

Government had realised Rs 919 crore through the fourth tranche. The first three tranches had attracted an investment of Rs 1,318 crore, equivalent to 4.9 tonnes of gold at the prices prevailing at those times.

BSE StAR Mutual Fund is the largest MF distributor platform in India.