In a latest development, the Union government is unlikely to issue further trances of sovereign gold bonds (SGBs), claiming that they are now viewed as a “complex and expensive instrument,” as informed by a senior government official.
Discontinuation Of Sovereign Gold Bonds
The media informed that the Government of India may discontinue the sale of Sovereign Gold Bonds (SGB) as they are considered an “expensive and complex” instrument.
Further, the Reserve Bank announced the redemption price of a SGB scheme (SGB 2016-17 Series I — issue date August 5, 2016) at Rs 6,938 for gold of the 999 purity (of one gram) at the start of this month.
Interestingly, this price is 122 percent higher than the issue price of Rs 3119 in August 2016.
The report indicates that the bond investors put in ₹72,274 crore in 67 segments or tranches of SGB.
Out of these 67 segments, four have fully matured and the money has been sent back to the investors who bought the bonds.
When it comes to the bonds, they are a form of debt instrument which a government or a corporation can use to raise money for a particular requirement.
Investors Doubling Their Money
With the use of these instruments, investors more than doubled their invested money which is payable from the government’s pocket, on the first four tranches issued between 2015 and 2017.
The government owes ₹85,000 crore to investors as highlighted in the recent Union budget.
This appears to be almost nine times the Rs 10,000 crore it owed at the end of March 2020, media reported.
Prior to this, the markets looked prepared as the demand for gold bonds had increased in the secondary markets.
The report noted that the Investors were willing to pay as much as 8 per cent more than the trading price set by the government as of Aug 14, 2024.
In the case of the Sovereign Gold Bonds, they are listed in the secondary market.
Further, can be traded in cash segments on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) through investors’ demat accounts.
Please note here that the profits made from the sale of the gold bonds through the exchanges will attract a capital gains tax.
