Gold Monetisation Scheme

[pib] Sovereign Gold Bond Scheme 2018 -19PIBPrelims Only


Note4students

Mains Paper 3: Economy | Mobilization of resources

The following things are important from UPSC perspective:

Prelims level: Read the tabular explanation of features of the Scheme. This increases scope for ample number of MCQs.

Mains level: Details of the Scheme


News

Sovereign Gold Bonds Scheme: 2018-19

  • Government of India, in consultation with the Reserve Bank of India, has decided to issue Sovereign Gold Bonds-2018-19.
  • The Bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices, and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange Limited.

Features of the Gold Bond Scheme

Sl. No. Item Details
1 Product name  Sovereign Gold Bond 2018-19.
2 Issuance  Reserve Bank India on behalf of the Government of India.
3 Eligibility  Resident entities including individuals, HUFs, Trusts, Universities and Charitable Institutions.
4 Denomination  Multiples of gram(s) of gold with a basic unit of 1 gram.
5 Tenor  8 years with exit option in 5th, 6th year and 7th year to be exercised on the interest payment dates.
6 Minimum size  1 gram of gold
7 Maximum limit  4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March) notified by the Government from time to time.
8 Joint holder In case of joint holding, the investment limit of 4 KG will be applied to the first applicant only.
9 Issue price Fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited for the last 3 working days of the week preceding the subscription period.

The issue price of the Gold Bonds will be `50 per gram less for those who subscribe online and pay through digital mode.

10 Payment option  Through cash payment (up to a maximum of 20,000) or demand draft or cheque or electronic banking.
11 Issuance form The Gold Bonds will be issued as Government of India Stock under GS Act, 2006.

The investors will be issued a Holding Certificate for the same.

The Bonds are eligible for conversion into demat form.

12 Redemption price  In Indian Rupees based on previous 3 working dayssimple average of closing price of gold of 999 purity published by IBJA.
13 Sales channel  Banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices (as may be notified) and recognised stock exchanges viz., National Stock Exchange of India Limited and Bombay Stock Exchange, either directly or through agents.
14 Interest rate Fixed rate of 2.50 percent per annum payable semi-annually on the nominal value
15 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 RBI from time to time.

The lien on the bonds shall be marked by the depositary by the authorized banks.

The loan against SGBs would be subject to decision of the lending bank/institution and cannot be inferred as a matter of right by the SGB holder.

16 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.

Every application must be accompanied by the ‘PAN Number’ issued by the Income Tax Department to the investor(s).

17 Tax treatment The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961).

The capital gains tax arising on redemption of SGB to an individual has been exempted.

The indexation benefits will be provided to long term capital gains arising to any person on transfer of bond.

18 Tradability Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date, as notified by the RBI.
19 SLR eligibility Bonds acquired by the banks through the process of invoking lien/hypothecation/pledge alone, shall be counted towards Statutory Liquidity Ratio.
20 Commission Commission for distribution of the bond shall be paid at the rate Rupee one per hundred Rupees the total subscription received by the receiving offices and receiving offices shall share at least paise 50 per hundred Rupees of the commission so received with the agents or sub agents for the business procured through them.

 

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