SGB advantages tradability through stock exchanges and also availability in demat and paper form.


The amount realised through the fifth tranche of Sovereign Gold Bond (SGB) scheme is expected to cross Rs 820 crore, according to a Finance Ministry release issued on Thursday. This was mobilised through over 2 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 the government including through its receiving offices, namely banks, post offices, NSE and BSE helped in mobilizing such encouraging response, the release added.

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.