Sovereign Gold Bond -5th Tranch-More than Rs. 820 crore expected to be realised

By | September 23, 2016
More than Rs. 820 crore expected to be realised through Fifth Tranche of Sovereign Gold Bond (SGB) Scheme from 1st to 9th September, 2016; This is mobilised through over 2.00 lakh applications representing around 2.37 tonnes of gold; The next tranche of SGB Scheme is expected around the third week of October, 2016, prior to Diwali, with additional features to attract more consumers.

The amount realised through the 5th Tranche of Sovereign Gold Bond (SGB) Scheme, is expected to cross Rs. 820 crore. This was mobilised through over 2.00 lakh applications representing around 2.37 tonnes of gold. These numbers are likely to go-up further as the receiving offices are still in the process of uploading information of huge rush of applications received on the last day. The aggressive marketing of the product by Govt of India, including through its receiving offices, namely Banks, Post Offices, NSE and BSE helped in mobilizing such encouraging response. SBI at Rs. 245 Crore subscription and Bank of India at Rs. 56 Crore subscription were the top performers. The Post Offices did their bit by attracting maximum number, around 22,000, applicants. The total mobilisation by Post Offices is expected at around Rs. 15-20 crore. The 5th Tranche of Sovereign Gold Bond (SGB) Scheme was open from 1st to9th September, 2016.

The issue price of the Sovereign Gold Bond in 5th tranche worked-out to a still higher level Rs. 3,150 per gram of gold based on the average of closing price of gold of 999 purity for the week August 22 to 26, 2016, as published by the India Bullion and Jewellers Association Ltd. (IBJA).

The Government will come-up with more tranches in 2016-17. The next tranche of SGB is expected around the third week of October, prior to Diwali. The next tranche is expected to come up with additional features to attract consumers even more.

In pursuance of the announcement in the Union Budget 2015-16, the Sovereign Gold Bond (SGB) scheme was launched as an alternative mode of investment to physical gold in November 2015. The aim of SGB is to reduce demand, including through imports, for physical gold, and in process reduce India’s Current Account Deficit.

Three tranches of SGB scheme were floated in 2015-16. In the current financial year two tranches have been launched (4th tranche from July 18-22, 2016 and 5th tranche from September 01-09, 2016). The total subscription in first 4 tranches was Rs. 2239 Crore corresponding to 7.85 tonnes of gold. The highest mobilisation was Rs. 921 Crore in the 4th tranche when the issue price was Rs. 3119 per gram of gold.

The sustained and encouraging response of the investors to the SGB Scheme (Series-I and series-II) of 2016-17, indicates that the product has come of age, and is increasingly becoming popular amongst the general public due to advantages it offers over physical gold, namely use as collateral for loans, Capital Gain Tax exemption on redemption, Zero risk of theft/ impurities associated with handling of physical gold; tradability through Stock Exchanges and also availability in DEMAT and paper form. The product, in addition, earns an interest rate of 2.75% per annum, semi-annually payable on initial investment.

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