Govt raises investment limit in gold bonds, to be available on tap

Amid lukewarm response from investors, the government Wednesday raised investment limit in sovereign gold bond to 4 kg from 500 gm per annum at present. The gold bonds will also be available on tap now instead of a public offer being issued from time-to-time earlier.

The decision was taken by the Union Cabinet headed by Prime Minister Narendra Modi.

Launched in November 2015, the gold bonds could so far mobilised only Rs 4,769 crore although the Centre had envisaged to wean Indian households away from their fetish for gold and jewellery through the bonds.

“The target was to shift part of the estimated 300 tons of physical bars and coins purchased every year for Investment into 'demat' gold bonds. The target mobilisation under the scheme at Rs 15,000 crore in 2015-16 and at Rs.10,000 crore in 2016-17. The amount so far credited in government account is Rs. 4,769 crore,” the finance ministry said.

“The investment limit per fiscal year has been increased to 4 kg for individuals, 4 Kg for Hindu Undivided Family (HUF) and 20 Kg for Trusts and similar entities notified by the government from time to time,” an official statement said after the meeting.

It said the ceiling will be counted on financial year basis and will include the SGBs purchased during the trading in the secondary market.

The ceiling on investment will not include the holdings as collateral by banks and financial institutions.

“SGBs will be available 'on tap’. Based on the consultation with NSE, BSE, banks and Department of Post, features of product to emulate 'on tap' sale would be finalised by Ministry of Finance,” the statement said.

To improve liquidity and tradability of SGBs, appropriate market making initiatives will be devised.

Market makers, could be commercial banks or any other public sector entity, such as MMTC or any other entity as decided by the Centre.

Government may, if so felt necessary, allow higher commission to agents.