Govt unveils 2nd edition of gold bond scheme

Expects to raise Rs 15,000 crore from bonds

The government has opened second tranche of gold bond scheme for subscription from Monday. The scheme will remain open till Friday and offer an interest rate of 2.75 per cent to domestic investors.

The bonds, which will be sold through banks, post offices and stock holding corporation, will be issued on February 8. The Reserve Bank has fixed the public issue price at Rs 26,000 per gram for the sovereign gold bonds, for which applications will be accepted from Monday.

The government is expected to raise Rs 15,000 crore from these bonds as part of its borrowing programme for the financial year ending March 2016.

However, the government is not too sure of garnering such an amount. The first tranche of gold bond scheme that was launched in November last year got a lukewarm response from the investors and could fetch only Rs 246 crore to the exchequer.

But experts are sanguine about the second tranche of gold bond scheme as they feel there is more appetite among consumers for gold and they are treating it as a safe haven in the wake of stock markets not promising better returns. This time, the government has also priced the bonds below the market rate. The bonds are priced at Rs 26,000 per 10 gram, whereas the prevailing market price is Rs 26,050.

Last time, the bonds were priced five times above the market rate. Finance Minister Minister Arun Jaitley had underscored in the Budget for 2015-16, the need to develop a financial asset like the gold bond as an alternative to people purchasing metal gold.

The gold bonds will be issued in denominations of 5 grams, 10 grams, 50 grams and 100 grams for a term of 5-7 years with a rate of interest to be calculated on the value of the metal at the time of investment. The scheme will have an annual cap of 500 grams per person.