Govt to issue sovereign gold bonds with tenure of 8 years

The government will issue Sovereign Gold Bonds (SGBs) in six tranches beginning April 20, the Reserve Bank of India said on Monday. 

Sovereign Gold Bond 2020-21 will be issued by Reserve Bank India on behalf of the Government of India. 

"Government of India, in consultation with the Reserve Bank of India, has decided to issue Sovereign Gold Bonds. The Sovereign Gold Bonds will be issued in six tranches from April 2020 to September 2020...," the RBI said. 

The bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram and the tenure of the SGB will be eight years with exit option after fifth year to be exercised on the interest payment dates. 

"The bonds will be restricted for sale to resident individuals, HUFs, trusts, universities and charitable institutions," the central bank said. 

The minimum permissible investment will be 1 gram of gold and the maximum limit of subscription shall be 4 kg for individual, 4 kg for HUF and 20 kg for trusts and similar entities per fiscal (April-March). 

"The investors will be compensated at a fixed rate of 2.50 per cent per annum payable semi-annually on the nominal value," the RBI said on the interest rate on the SGBs. 

The first tranche (2020-21 Series I) for subscription will open on April 20 and close on April 24. The bonds will be issued on April 28. 

The sixth tranche (2020-21 Series VI) has been scheduled for August 31-September 4. 

On the issue price, RBI said it 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 for the last 3 working days of the week preceding the subscription period. 

Also, the issue price of the gold bonds will be Rs 50 per gram less for those who subscribe online and pay through digital mode. 

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

The sovereign gold bond scheme was launched in November 2015 with an objective to reduce the demand for physical gold and shift a part of the domestic savings -- used for the purchase of gold -- into financial savings.