India reviews interest rates on sovereign Gold bonds

INDIA May 19 2016 9:31 AM

MUMBAI (Scrap Register): The central government of India, in consultations with banks and the Reserve Bank, is finalising a fourth tranche of sovereign gold bonds (SGB).

This one is expected to be more investor-friendly and options under consideration include selling bonds also through a stock exchange, via an offer for sale (OFS), where member-brokers can put orders on behalf of investors.

There is also some procedural simplification under consideration, say sources. In the earlier tranche, RBI was not able to complete issue of bond certificates; these are being issued now. RBI is sending these wherever possible through e-mails; a demat process is also said to be on.

The government is also considering if the interest rate paid, now 2.75 per cent per annum, needs to be aligned with the overall rate structure. Recently, the government cut interest rates on all saving instruments, including postal savings, in line with an overall falling rate structure. At a fixed 2.75 per cent, the government knows the outgo during the tenure.

On sale through an exchange via OFS, also used for divesting stake in public sector units, the government might decide on a ceiling; if the orders are more, allotments can be made proportionally, explained an official. However, if there is no issue size, “all orders will be fulfilled, subject to a 500g a year limit per investor”, said a BSE official, which plans to list trades in SGBs.