The Reserve Bank of India, in consultation with the Government of India, has decided to issue third tranche of Sovereign Gold Bonds. Applications for the bond will be accepted from March 8, 2016 to March 14, 2016. The Bonds will be issued on March 29, 2016. The Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL) and designated post offices. The borrowing through issuance of the Bond will form part of market borrowing programme of the Government of India.
It may be recalled that Honourable Finance Minister had announced in Union Budget 2015-16 about developing a financial asset, Sovereign Gold Bond, as an alternative to purchasing metal gold. Accordingly, two tranches of issuances have been undertaken during 2015-16, so far. The features of the Bond are given below:
| Sl. No. | Item | Details |
| 1. | Product name | Sovereign Gold Bond 2016 – Series II |
| 2. | Issuance | To be issued by Reserve Bank India on behalf of the Government of India. |
| 3. | Eligibility | The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions. |
| 4. | Denomination | The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram. |
| 5. | Tenor | The tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates. |
| 6. | Minimum size | Minimum permissible investment will be 2 units (i.e. 2 grams of gold). |
| 7. | Maximum limit | The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained. |
| 8. | Joint holder | In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only. |
| 9. | Frequency | The Bonds will be issued in tranches. Each tranche will be kept open for a period to be notified. The issuance date will also be specified in the notification. |
| 10. | Issue price | Price of Bond will be fixed in Indian Rupees on the basis of the previous week’s (Monday–Friday) simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA). |
| 11. | Payment option | Payment for the Bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or cheque or electronic banking. |
| 12. | Issuance form | Government of India Stock under GS Act, 2006. The investors will be issued a Holding Certificate. The Bonds are eligible for conversion into demat form. |
| 13. | Redemption price | The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA. |
| 14. | Sales channel | Bonds will be sold through banks, SCHIL and designated Post Offices, as may be notified, either directly or through agents. |
| 15. | Interest rate | The investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment. |
| 16. | Collateral | Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time. |
| 17. | KYC Documentation | Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required. |
| 18. | Tax treatment | The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961) and the capital gains tax shall also remain same as in the case of physical gold. |
| 19. | Tradability | Bonds will be tradable on exchanges/NDS-OM from a date to be notified by RBI. |
| 20. | SLR eligibility | The Bonds will be eligible for Statutory Liquidity Ratio purposes. |
| 21. | Commission | Commission for distribution of the bond shall be paid at the rate of 1% of the subscription amount. |
Related RBI Notification is as follows :-
Reserve Bank of India
RBI/2015-16/333
IDMD.CDD.No. 2020/14.04.050/2015-16
March 04, 2016
The Chairman& Managing Director
All Scheduled Commercial Banks,
(Excluding RRBs)
Stock Holding Corporation of India Ltd.( SHCIL)
Dear Sir/Madam,
Sovereign Gold Bonds- 2016 Series-II
Government of India has vide its Notification F.No. 4(19)-W&M/2014 dated March 04, 2016 announced that the Sovereign Gold Bonds, 2016 (“the Bonds”) will be open for subscription from March 8, 2016 to March 14, 2016. The Government of India may, with prior notice, close the Scheme before the specified period. The terms and conditions of the issuance of the Bonds shall be as follows:
1. Eligibility for Investment:
The Bonds under this Scheme may be held by a person resident in India, being an individual, in his capacity as such individual, or on behalf of minor child, or jointly with any other individual. The bond may also be held by a Trust, Charitable Institution and University. “Person resident in India” is defined under section 2(v) read with section 2(u) of the Foreign Exchange Management Act, 1999
2. Form of Security
The Bonds shall be issued in the form of Government of India Stock in accordance with section 3 of the Government Securities Act, 2006. The investors will be issued a Holding Certificate (Form C). The Bonds shall be eligible for conversion into de-mat form.
3. Date of Issue
Date of issuance shall be March 29, 2016.
4. Denomination
The Bonds shall be denominated in units of one gram of gold and multiples thereof. Minimum investment in the Bonds shall be two grams with a maximum limit of subscription of five hundred grams per person per fiscal year (April – March).
5. Issue Price
Price of the Bonds shall be fixed in Indian Rupees on the basis of the previous week’s (Monday – Friday) simple average closing price for gold of 999 purity, published by the India Bullion and Jewellers Association Ltd. (IBJA).
6. Interest
The Bonds shall bear interest at the rate of 2.75 percent (fixed rate) per annum on the amount of initial investment. Interest shall be paid in half-yearly rests and the last interest shall be payable on maturity along with the principal.
7. Receiving Offices
Scheduled commercial banks (excluding RRBs), designated Post Offices (as may be notified) and Stock Holding Corporation of India Ltd (SHCIL) are authorized to receive applications for the Bonds either directly or through agents.
8. Payment Options
Payment shall be accepted in Indian Rupees through Cash up to a maximum of Rs.20,000/- or Demand Drafts or Cheque or Electronic banking. Where payment is made through cheque or demand draft, the same shall be drawn in favour of receiving office.
9. Redemption
i) The Bonds shall be repayable on the expiration of eight years from February 8, 2016, the date of issue of Gold bonds. Pre-mature redemption of the Bond is permitted from fifth year of the date of issue on the interest payment dates.
ii) The redemption price shall be fixed in Indian Rupees on the basis of the previous week’s (Monday – Friday) simple average closing price for gold of 999 purity, published by IBJA.
10. Repayment
The receiving office shall inform the investor of the date of maturity of the Bond one month before its maturity.
11. Eligibility for Statutory Liquidity Ratio (SLR)
The investment in the Bonds shall be eligible for SLR.
12. Loan against Bonds
The Bonds may be used as collateral for loans. The Loan to Value ratio will be as applicable to ordinary gold loan mandated by the RBI from time to time. The lien on the Bonds shall be marked in the depository by the authorized banks.
13. Tax Treatment
Interest on the Bonds shall be taxable as per the provisions of the Income-tax Act, 1961. Capital gains tax treatment will be the same as that for physical gold.
14. Applications
Subscription for the Bonds may be made in the prescribed application form (Form ‘A’) or in any other form as near as thereto stating clearly the grams of gold and the full name and address of the applicant. The receiving office shall issue an acknowledgment receipt in Form ‘B’ to the applicant.
15. Nomination
Nomination and its cancellation shall be made in Form ‘D’ and Form ‘E’, respectively, in accordance with the provisions of the Government Securities Act, 2006 (38 of 2006) and the Government Securities Regulations, 2007, published in part III, Section 4 of the Gazette of India dated December 1, 2007.
16. Transferability
The Bonds shall be transferable by execution of an Instrument of transfer as in Form ‘F’, in accordance with the provisions of the Government Securities Act, 2006 (38 of 2006) and the Government Securities Regulations, 2007, published in part III, Section 4 of the Gazette of India dated December 1, 2007.
17. Tradability of bonds
The Bonds shall be eligible for trading from such date as may be notified by the Reserve Bank of India.
18. Commission for distribution
Commission for distribution shall be paid at the rate of rupee one per hundred of the total subscription received by the receiving offices on the applications received and receiving offices shall share at least 50% of the commission so received with the agents or sub-agents for the business procured through them.
19. All other terms and conditions specified in the notification of Government of India in the Ministry of Finance (Department of Economic Affairs) vide number F. No.4(13) W&M/2008, dated 8th October 2008 shall apply to the Bonds.
Yours faithfully,
(Arun Bhagoliwal)
Deputy General Manager
Encls.: As above.
